Webinar Replay

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1. The New Tool: Chiefs Home Equity Instrument (HEI)

• Concept: Clients can sell a fraction of their home to Cornerstone Financing for cash—without monthly payments.
• Trigger Events: Repayment occurs at death, permanent move-out, or voluntary payoff.
• Protections:
  • Homeowners retain 100% living rights and at least 50–80% ownership.
  • Cornerstone’s share is capped (never more than 50% of future value).
  • Costs are limited to ~12.99% annualized return for Cornerstone.
  • If home values fall, Cornerstone shares in the losses.

📖 Reference: Consumer Financial Protection Bureau – “What is home equity?”
https://www.consumerfinance.gov/ask-cfpb/what-is-home-equity-en-209/

2. Why It Matters for Advisors

• Dormant Asset: U.S. homeowners hold ~$35 trillion in home equity.
• Traditional Funding Options: Cash, AUM liquidation, or premium financing. Each has tax, liquidity, or risk trade-offs.
• Chiefs as “AUM Protection”: Lets clients fund life insurance, annuities, LTC coverage, Roth conversions, or education savings without liquidating portfolios.

📖 Reference: Federal Reserve – “Distribution of Household Wealth in the U.S.”
https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/chart/

3. Cost & Comparison to Other Products

• HELOCs: Lower interest, but require monthly after-tax payments.
• Reverse Mortgages: High upfront fees, best seen as “last resort.”
• Chiefs: Costs decline over time; after ~10 years, effective APR can be closer to long-term home price appreciation (~5–7%).

📖 Reference: HUD – “Home Equity Conversion Mortgages (HECM)”
https://www.hud.gov/program_offices/housing/sfh/hecm/hecmhome

4. Case Studies Highlighted

1. Long-Term Care Funding:
   • 60-year-old used Chiefs to generate $114K from home equity.
   • Purchased IUL with LTC rider → $500K LTC coverage + $500K death benefit.
   • Achieved higher IRR than paying premiums with cash.
2. Income Planning:
   • 45-year-old monetized $100K from home.
   • Purchased lifetime annuity, producing >$200K/year at age 71.
   • Could repay Chiefs with annuity proceeds and still retain $170K annually.
3. Roth Conversion Strategy:
   • Couple with $800K IRA needed $320K for Roth conversion tax.
   • Instead of liquidating investments, used Chiefs.
   • Result: $2.7M more liquidity by keeping taxable portfolio intact.

📖 Reference: Society of Actuaries – “Home Equity in Retirement”
https://www.soa.org/research/topics/retirement/

5. Compliance & Tax Considerations

• Not Debt: Chiefs are structured as a forward sale, not a loan, avoiding some FINRA debt-related disclosure rules.
• Capital Gains: Chiefs proceeds are not taxable upfront. They adjust basis when the home is sold.
• Step-Up Basis: At death, the home receives step-up basis; Chiefs repayment simply reduces the estate’s net equity.
• Medicaid & LTC Planning: Open question—treatment may vary by state.

📖 Reference: IRS – “Topic No. 701, Sale of Your Home”
https://www.irs.gov/taxtopics/tc701

6. Practical Advisor Takeaways

• Target Clients:
  • Age 50+ in “forever homes.”
  • Mass affluent and HNW clients with concentrated home equity.
• Use Cases:
  • Funding insurance (life, LTC, annuity).
  • Liquidity for Roth conversions or large tax events.
  • Education funding without disrupting retirement assets.
• Advisor Role:
  • Model scenarios with tools like Wealthy and Wise.
  • Compare Chiefs vs. HELOCs, reverse mortgages, or status quo.
  • Present trade-offs between liquidity, income security, and heirs’ inheritance.

📖 Reference: National Council on Aging – “Using Home Equity to Fund Retirement”
https://www.ncoa.org/article/using-home-equity-to-fund-retirement

✅ Bottom Line for Financial Advisors:
Chiefs provide a flexible way to unlock dormant home equity without immediate repayment obligations. They can help clients preserve portfolio growth, reduce tax drag from AUM liquidation, and better fund retirement risks like LTC, income longevity, and tax planning. Advisors should carefully weigh costs, estate trade-offs, and compliance, but Chiefs open a new planning frontier beyond reverse mortgages and HELOCs.