The Revelation: A Son's Perspective

Consider this scenario: a parent discusses estate plans, and their child offers a revealing insight. "Mom and Dad," he begins, "there's warm money and cold money. Warm money is what you give us with love, while you're alive, and you can see our appreciation. Cold money is what we receive after you're both gone, regardless of your wishes." He then adds, simply, "Your children would prefer to have more of the warm money."

The Parental Dilemma: Balancing Future Inheritance with Present Needs

Parents often make financial adjustments in retirement, cutting back on expenses like travel or recreation, to "leave a little something." For those living on modest incomes, like Social Security, there can even be concern about leaving funeral expenses for their children to manage. The desire to prevent future financial hardship for their children is a powerful driver.

However, is this approach always the most impactful way to support your family? What if there's a way to access existing assets to create "warm money" without compromising your financial security?

Rethinking Legacy: The Power of Warm Money

Consider using your resources to create meaningful experiences and provide support now. This is the essence of "warm money."

Warm money can take various forms:

• Shared experiences: A family trip, a joint hobby, or more frequent gatherings and meals out.

• Support for life's milestones: Helping with a down payment on a home, contributing to a grandchild's education, or assisting with unexpected medical costs.

• Practical gifts: A car that eases a commute, an investment in a child's business, or a financial cushion during a difficult period.

These are not just financial transactions; they are opportunities to foster connection and allow parents to see the immediate, positive impact of their generosity. Witnessing a child achieve a goal, or seeing their relief when a burden is eased can be a fulfilling experience.

How a Reverse Mortgage Can Help Create "Warm Money"

Many homeowners find a significant portion of their wealth tied up in their home's equity. A reverse mortgage can be a practical tool to access this equity, potentially creating "warm money" without requiring you to sell your home or make monthly mortgage payments.

A reverse mortgage allows homeowners, generally aged 62 or older, to convert a portion of their home equity into cash. You maintain ownership of your home and continue to reside there. The loan typically becomes due when the last borrower permanently leaves the home.

Here's how it can facilitate "warm money" initiatives:

• Supplemental Income: A steady stream of funds can cover daily living expenses, freeing up other savings for "warm money" gifts or activities.

• Lump Sum for Specific Needs: Access a one-time payment to help a child with a down payment, contribute to tuition, or cover a significant family expense.

• Line of Credit: A flexible line of credit that grows over time, available for unforeseen needs or opportunities to create those "warm money" experiences.

• Eliminate Existing Mortgage Payments: For many, using a reverse mortgage to pay off an existing mortgage can eliminate monthly payments, freeing up substantial cash flow. This freed-up money can then be directed toward "warm money" efforts or simply enhance your retirement lifestyle.

By responsibly utilizing a reverse mortgage, parents can access their home equity to support a more comfortable retirement and, importantly, share their resources and experiences with their children while they are alive to enjoy the mutual benefits. It can transform potential future inheritance into present-day acts of support and connection.

The True Inheritance: Connection and Present Support

Responsible financial planning is always important, and understanding all aspects of a reverse mortgage is essential. It's not the right choice for everyone, and consulting with a qualified financial advisor and a reverse mortgage specialist is recommended. However, the "warm money" concept, supported by tools like a reverse mortgage, encourages us to broaden our definition of "inheritance."

Perhaps the most valuable legacy we can leave our children is a foundation of shared experiences, a strong sense of connection, and the knowledge that they were supported throughout our lives. It's about living a fulfilling retirement while also sharing your resources in ways that bring immediate, tangible benefits and joy to your loved ones. It's about ensuring that the money intended for them is received with the warmth of your relationship, not solely after your passing.

What are your thoughts on "warm money" versus "cold money," and how do you see yourself shaping your legacy?