Confronting HECM Fiction: Harlan Accola

Part 2


Reverse mortgage information exposed & corrected

Join us for the final installment of our interview with Harlan Accola who penned a column in NASDQ fact-checking Dave Ramsey’s erroneous reverse mortgage claims.

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5 comments

Michael J Friedman September 20, 2021 at 5:45 am

Excellent segment. Harlan is correct. When it comes to the children, what’s the difference between a $500K house and a $500K IRA.

Reply
James E. Veale, CPA, MBT September 20, 2021 at 10:10 am

An IRA versus a house? Really? They are GENERALLY not comparable.

An IRA is a vehicle to hold assets. So what is in the IRA? Are they marketable securities, TICs or other forms of real estate, precious metals, or what?

Is the IRA, an after tax IRA, a taxable IRA, or a Roth IRA that is more 5 years old? If it is a Roth that is at least 5 years old, there are no tax issues and generally selling commissions on underlying assets are less than 4%. The beneficiary can take any percentage of the assets without “disposing” of the IRA. There are NO taxes associated with HOLDING the IRA.

What are the net proceeds from selling a $500,000 house (after selling and fix up costs)? Holding this asset means daily accrual of real estate taxes (most likely accrued taxes from last paid to date of death as well). What are typical real estate commissions in the area? Is the property so far away that it is unmanageable?

For income tax purposes, the house will generally get a step in basis. IRAs have no step up in basis but the distributions on a Roth IRA that is over five years are not taxable for income tax purposes. The after tax IRA is only table on any increase in value that is considered distributed; while the increase is ordinary income (versus capital gains), the return of contributions are non-taxable. All distributions from a taxable IRA are taxable as ordinary income.

So if the IRA is a Roth that is at least five years old and the underlying assets are marketable securities, give me the IRA every single time.

Reply
Jim Warns September 20, 2021 at 5:57 am

Great interview, Shannon! Kudos to Harlan for carrying the reverse mortgage banner forward.

Reply
Owen Coyle September 20, 2021 at 6:21 am

Shannon, those two interviews with Harlan were EXCELLENT. Thanks so much for sharing that information with us loan originators.

I’m looking forward to watching any future interviews with Harlan. As I’ve told you many times before, you’re doing a great job at Reverse Focus, I hope you continue to do it for many years to come.

Owen Coyle

Reply
Karen Pryor September 20, 2021 at 1:11 pm

Thanks so much for putting these interviews together Shannon. So much great info!

Reply

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