Back in high school, I was friends with a guy who liked to brag that he came from “old money”. Jake was an ultra-prep; at the age of sixteen, he drove to a private school in his own Porsche, wore tailored polos and sported real RayBans. My friends and I loved to visit his house not just for its pool, but because the guy had a private twelve-seat movie theater in the basement of his house. Jake attributed his family’s wealth to his grandfather’s grandfather’s grandfather, who was a business partner of this guy named Andrew Carnegie.

Jake was my first exposure to the concept of generational wealth, and I have been fascinated ever since. I love the idea of striving for success and not just achieving it, but passing that success along to your children, and their children, to continue passing the fruits of your labor down through the generations.

As a loan officer, generational wealth comes up in conversation with my clients with fair regularity. In fact, over half of my clients with children talk about buying a house so that their children can one day inherit it. Unfortunately, as noble as these thoughts are, life rarely turns out as optimistically as initially planned.

Back when I was an insurance agent, I had the pleasure of working alongside a couple who, for the sake of privacy, I will call Mr. and Mrs. Doe. These two elderly people were the embodiment of southern courtesy and absolutely devoted to one another and their son. Successful financial planning had allowed them to pay off their house in the late 1990’s, while his pension and their social security allowed them to live comfortably in a home that the couple had shared for fifty years.

Last year, Mrs. Doe’s health began to fail and she began to lose her balance and fall, but she refused to allow herself to move into an assisted care center. Eventually, Mrs. Doe took one tumble too many, fractured a hip, and never made it out of the hospital. Mr. Doe followed his wife to heaven less than a month later. Their son, who I shall call John, inherited his parent’s house… and promptly sold it.

Look- this isn’t the case of an ungrateful son- far from it. John had three teenagers, a wife, two big dogs, and a house of his own within walking distance of his kids’ high school. As much as he loved his parents for the gift of their house, it fit his financial situation better to simply sell his parents’ house and put the proceeds toward his own mortgage.

Personally, I don’t think Mr. and Mrs. Doe would have minded. In fact, I think they’d have been happy that she could contribute to the financial success of her child and grandchildren. This got me thinking though- what if there was a way to have gone through this process while the Does were still alive, so that they could experience those benefits firsthand?

Well, guess what? As a loan officer, I found a way!

According to tax experts, parents can gift money to their children and grandchildren up to a certain limit without incurring any tax penalties. In fact, in 2024, the annual tax-free gift limit is $18,000 for each parent to each family member. This means that Mr. Doe could have given $18,000 to his son, his son’s wife, and to each grandchild, and then Mrs. Doe could have done the same exact thing. Altogether, this means that the Does could have gifted $180,000 without anyone facing tax penalties for said gift.

Let’s take things a step further. The Does’ house was valued at $250,000, and it was completely paid off. By using a reverse mortgage, they could have taken out a majority of the equity in that property as a lump sum, gifted it to their descendants, and remained living in that house for the rest of their lives.

I’m all for crazy theoretical math, but if there’s one thing that you remember from this article, it’s that loan officers are uniquely empowered to identify creative solutions to help our clients fully utilize the assets they have to their names. Have a question or unique circumstance of your own? Drop me a line- I’m always happy to see how I can leverage my own personal brand of crazy to help you and yours live your best lives!