I’ve often said that having a millionaire mentality doesn’t require having a million dollars – it’s about thinking like one.
Throughout my career, I’ve learned that millionaires are rarely frivolous with their money. They follow the principle that just because you can spend, doesn’t mean you should. Their focus is on building assets while being realistic and thinking in terms of after-tax dollars.
This brings me to a frequently overlooked tax-saving strategy: The CHIP Reverse Mortgage by HomeEquity Bank. Simply put, the CHIP Reverse Mortgage allows your clients to access up to 55% of their home’s equity as tax-free cash, helping reduce their taxable income. Here’s how:
1) Reduce Taxable Withdraws from RRSPs/ RRIFs:
For retired clients, withdrawing from registered plans can put them into a higher tax bracket, increasing the amount they owe the government. Instead, they can use the CHIP Reverse Mortgage to access tax-free cash from their home, reducing the need to withdraw taxable income from these registered plans.
2) Preserve Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits:
These benefits have a claw back feature if their income exceeds a certain threshold. Since funds from the CHIP Reverse Mortgage are not considered taxable income, it will not impact your client’s eligibility.
3) Reduce Capital Gains on Investments:
When clients need cash, they may be tempted to sell investments, potentially triggering a capital gains tax or selling at an unfavourable time, resulting in a loss. The CHIP Reverse Mortgage offers an alternative, allowing them to cover expenses while keeping their investments growing in a tax-free TFSA or tax-deferred RRSP/RRIF.
4) Fund Gifting or Estate Planning:
The CHIP Reverse Mortgage allows clients to accelerate their legacy by giving tax-free gifts to their heirs now, while avoiding estate taxes or probate fees later. This strategy is especially beneficial for larger estates where probate and tax costs could be significant.
5) Pay off High-Interest Debt with Tax-Free Money:
For clients carrying credit card debt or other high-interest loans, the CHIP Reverse Mortgage can help eliminate interest payments that aren’t tax-deductible, improving cash flow without increasing taxable income.
As mentioned, in previous blogs, there are important factors to consider. The CHIP Reverse Mortgage is a valuable option for many, but it’s not one-size-fits-all. Suitability depends on your client’s unique situation and maybe estate planning goals.
With tax season approaching, reaching out to clients now shows that you’re proactively looking out for their best interests.
To learn more about the CHIP Reverse Mortgage, contact your HomeEquity Bank BDM or BDA.
Pattie Lovett-Reid
Chief Financial Commentator
HomeEquity Bank
