How the EquityKey Real Estate Option Works
Applications to Advanced Estate Planning
Sample Case #1*
- Husband and wife. 76 Year old male, 65 year old female, 4 children, 11 grandchildren
- $10,000,000 commercial building as part of $14,000,000 in total net worth.
- Estate Tax Considerations**
- Clients decide to do an EquityKey option on their commercial building. They receive a lump sum payment of $1,000,000
from EquityKey in exchange for 50%
of the future appreciation of their commercial building.
- Clients establish an Irrevocable Life Insurance Trust and purchase a second-to-die life insurance policy with the proceeds
from EquityKey. The first year premium of $1,000,000.00 affords them $ 6,000,000.00 of life insurance coverage
which will provide funds to pay estate taxes upon the death of the second spouse.
* For illustrative purposes only. Assumes a real estate growth rate of 4% over the life of the option, a $2,000,000.00 exemption per individual and an estate tax rate of 50%.
If EquityKey ultimately purchases the property from the heirs/estate, an 8% acquisition cost is withheld: any amount under the actual accquisition costs EquityKey incurs to sell the property is subsequently
refunded to the heirs/estate such that they only bear the true cost of the property disposition.
** Hypothetical example only. Nothing in this example is intended to provide specific financial, tax or other estate planning advice. Please contact your financial, tax or other advisor concerning your options and what may be best suited for you.
Sample Case #2
- 75 year old widow
- $1,200,000 Home Value with no mortgage debt.
- Long term care planning*
- Client decided to do an EquityKey option on her residence. She receives a lump sum payment of $150,000
from EquityKey in exchange for 50% of the future appreciation of her property.
- With $100,000 she purchased an insurance product that combined universal life and long term care in one policy.
No matter what the future held she knew that she would receive long term care benefits and/or a death benefit for her heirs.
With the remaining $50,000 she paid for some much needed remodeling of her house to ensure that she could continue to live in her home
comfortably for the rest of her life.
*Hypothetical example only. Nothing in this example is intended to provide specific financial, tax or other estate planning advice.
Please contact your financial, tax or other advisor concerning your options and what may be best suited for you.
Sample Case #3
- Married Couple. Husband 73, Wife 68
- $800,000 Home Value with no mortgage debt.
- Travel plans*
- Clients loved to travel, but felt their finances would not allow them to pursue their dreams.
- Clients decided to do an EquityKey option on their residence, and received a lump sum payment of $110,000
from EquityKey in exchange for 50% of the future appreciation of their property.
- Clients invested the money into an account earning 5% interest to create an annual trip budget.
- For the next 15 years they will be able to spend an average of $10,000 a year on special trips that build lasting memories.
From London to Las Vegas, from Maui to Madrid, they can live their dreams during their retirement years.
*Hypothetical example only. Nothing in this example is intended to provide specific financial, tax or other estate planning advice.
Please contact your financial, tax or other advisor concerning your options and what may be best suited for you.
For Federal Income tax purposes, granting an option is an open transaction, the tax of which is determined at the time the option is
exercised, sold or lapses. (Rev. Rul. 78-182, 1978-1 C.B. 265). Alternatively, the option may be treated as a forward contract, but
the tax consequence would be the same as if treated as an open transaction. (A. Kramer, Financial Products, Section 60.04[A];
Rev. Rul. 74-223, 1974-1 C.B. 23).
For more information, contact one of Diversified's EquityKey Certified Agents at
212-714-1027
Diversified Residential and Commercial Services
421 Seventh Avenue
New York, NY 10001
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