Forward Inheritance

Staging Model

The Right Story

Compare funding Roth conversion taxes with home equity liquidity versus drawing taxes from retirement assets, then see how that decision may affect client outcomes, family transfer value, and advisor economics.

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Inputs

Editable assumptions for property, conversion, and advisory economics.

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Property / HEI assumptions

Home value, mortgage, appreciation, and HEI structure assumptions.

Estimated annual home appreciation

Derived HEI pricing

Settlement rule: investor receives the lesser of capped accrual or contractual share of future home value.

Combined CLTV: 42%

Pricing tier: <= 50% CLTV

Rate cap: 12.99%

HEI factor: 2.25x

Effective HEI factor: 2.25x

HEI starting %: 6.7%

HEI equity share %: 15%

Roth conversion assumptions

Conversion amount, tax assumption, and return profile.

Advisor assumptions

Fee profile and relationship continuity assumptions.

favorable

Modeled outcome appears favorable

Decision signal uses modeled wealth delta, HEI branch behavior, implied settlement IRR, and CLTV eligibility.

  • - HEI amount is within modeled CLTV eligibility.
  • - Total family wealth after inheritance +10 years is positive vs no HEI (+$80,767).
  • - Implied HEI IRR exceeds expected Roth return by 6%.
  • - Rate-cap track remains binding at the selected horizon.

Tax-Free Compounding Callout

Additional untaxed Roth gains after inheritance +10 years: $215,882

HEI settles at inheritance, then inherited Roth assets are assumed to continue compounding tax-free for 10 more years.

Outcome snapshot

The key outputs at a glance before digging into the flow and stakeholder detail.

Net estate with HEI

$1,812,189

Wealth delta (+10y post-inheritance)

$80,767

Roth value at event

$854,276

Remaining home equity (with HEI)

$957,914

Money-flow comparison

Same conversion, same timeline, different liquidity source for taxes.

Step

Lane A — With HEI

Lane B — Without HEI

HEI liquidity applied to conversion tax

$100,000

$0

Conversion tax funded

$168,000

$168,000

Retirement assets used for conversion tax

$68,000

$168,000

Roth principal invested

$532,000

$432,000

Roth value after 7 years

$854,276

$693,698

Home value after 7 years

$1,723,029

$1,723,029

HEI cap payoff track

$235,115

Not applicable

HEI contractual share of future home value track

$258,454

Not applicable

HEI repayment / settlement

$235,115

$0

Binding branch at horizon

Rate Cap

No HEI

Implied IRR from actual settlement

13%

Not applicable

Binding share threshold (cap-accrued vs equity cap)

15%

Not applicable

Net family wealth at inheritance event

$1,812,189

$1,886,726

Net family wealth after +10 years inherited Roth continuation

$2,638,403

$2,557,637

Total estate difference created by this strategy

$80,767

Includes Roth continuation for +10 years after inheritance.

Inflation-adjusted delta (17 years at 2.5%): $53,079

Model notes

  • Conversion tax uses federal + state rates.
  • With HEI, tax is funded first by HEI liquidity up to $100,000; remaining tax shortfall ($68,000) is taken from retirement assets.
  • Effective annual returns assume 7% for Roth and 2% for home value.
  • HEI settlement is the lesser of capped accrual on original HEI amount or contractual share of future home value: cap at 12.99% and derived share of 15%.
  • Heirs view assumes Roth continues compounding for an additional 10 years after inheritance while HEI is settled at the inheritance event.
  • Binding branch at horizon: Rate Cap with implied settlement IRR of 13%.
  • Branch crossover: Rate cap remains binding through selected horizon.
  • Outputs are illustrative and intended for planning conversations only.

Why would each stakeholder do this?

Stakeholder view of the same scenario for client, family, and advisor conversations.

Homeowner / Client

Why the homeowner would do this

By paying the conversion cost with home equity liquidity instead of drawing from retirement assets, more capital may remain invested in the Roth.
Retirement assets preserved in Roth$100,000
Estimated Roth value at inheritance event$854,276
Estimated home value at same time$1,723,029
Estimated HEI payoff / settlement amount$235,115
Estimated remaining home equity (after mortgage + HEI)$957,914
Estimated combined net estate value$1,812,189

Heirs / Family

Why the family would care

The strategy may shift more long-term value into a tax-advantaged asset while preserving remaining home equity for the family.
Projected inherited Roth value at inheritance$854,276
Projected inherited Roth value after +10 years$1,680,490
Projected net home equity after mortgage + HEI settlement$957,914
Total projected family wealth transferred after +10 years$2,638,403
Difference vs paying conversion costs out of retirement assets after +10 years$80,767

Advisor

Why the advisor would care

Preserving more assets inside the managed Roth may increase the amount an advisor can potentially oversee during the client’s life and, if retained by heirs, during the post-death inherited asset period.
Projected AUM preserved$160,578
Projected management fees during client lifetime$69,314
Projected inherited AUM continuation$640,707
Projected additional fees if heirs retain relationship$95,054
Total potential advisory revenue over full timeline$164,367