Planning Ahead: Turning Home Equity Into Freedom

Financing Advice from Matt Beck

This month, San Carlos Life spent time with local Financial Advisor and Chief Partnership Officer, Matt Beck, who has called the Peninsula home for many years.  His firm, Brio Financial Group, provides comprehensive financial planning and helps clients navigate the complexities of buying real estate as either an investment or as a primary home.

“If you’ve called San Carlos home since the 1990’s or beyond, you’ve seen your neighborhood transform, and your home value right along with it. For many longtime residents, the family house is not just full of memories, it’s also one of the largest assets you own,” Matt says.

As retirement approaches, or as the possibility of moving into senior living comes into view, that home equity can become a key part of the financial planning conversation. Matt helps seniors plan for when it’s time to leverage that asset, and is always there for his clients every step of the way.

When asked what questions he gets most from investors regarding their real estate, Matt shared the following:

Should I downsize into something more manageable?

Many older homeowners find that moving to a smaller home can free up cash and cut ongoing expenses. A smaller place often means a lower (or no) mortgage, plus reduced maintenance or utility bills. By selling a long-time family home, you can tap into its value when you suddenly need funds. This extra cash flow (or buying a new home with cash) may let you reduce taxes or even move to a lower-cost area. Downsizing also can improve lifestyle; no more stairs or yard work, and options like condos or 55+ communities may appeal.

The trade-off is that selling and moving comes with all kinds of moving costs which can quickly add up. For these reasons, retirees are advised to “run the numbers” carefully. It may even make sense to sell first (when the market is good) and rent temporarily until you find the right smaller home.

Two Funding Strategies for Assisted Living

Option 1: Tap into the value of your home without necessarily selling it outright

For example, a reverse mortgage (Home Equity Conversion Mortgage) can turn part of your home’s equity into tax-free cash, either as a lump sum, a monthly payment, or a line of credit. You keep title to your home and make no monthly mortgage payments; instead, the loan balance grows with interest. The pros are clear: you get extra income for care costs while continuing to live at home.

The cons include fees, interest, and the fact that your heirs will inherit less home equity when the loan comes due. Reverse mortgages can be tricky, so discuss them with a certified advisor before committing.

Option 2: Downsizing or renting

By selling and moving to a smaller, less expensive place, you convert equity to cash while also lowering ongoing housing costs. Renting out part of your home or the entire home (if you move to assisted living) can also generate income. Whatever you choose, coordinate with financial and eldercare professionals.

In every case, the goal is to make your real estate work for you by providing funds for care, without losing sight of your long-term security.

Would selling now free up the resources I need for retirement or healthcare?

Converting home equity to retirement income is one of the major reasons to consider selling a home before or during retirement. Selling a long-time home can be a big help if you need additional funds for living expenses, medical bills, or care services in retirement.

Timing the sale is important. In many cases it’s wiser to sell and then rent or move into a new place, rather than postpone selling until after you retire. If you wait too long and the market cools, you could lose equity. If you choose not to sell immediately (or the house doesn’t sell right away), you’ll keep paying mortgages, taxes, insurance and maintenance on top of any care expenses, which can strain finances.

Keep in mind that selling a house can affect eligibility for certain benefits like VA aid or Medicaid. For instance, selling a home too early might affect Medicaid eligibility or VA benefits, so it may be wise to plan the sale timing carefully. It is always best to coordinate with a financial advisor when planning the timing of a sale.

Running Scenarios that Compare Selling your San Carlos Home Now Versus Later

The key to good timing is to run the numbers for each scenario: selling now versus later. Estimate what your San Carlos home would sell for today vs. in 5 or 10 years (accounting for market trends), and subtract real costs like agent commissions and moving expenses.

Similarly, compare life as a downsized Bay Area resident (keeping Prop 19 benefits and local ties) against life in another state. For example, if you move to Nevada, you might save on taxes (no state income tax) but you’d face different property tax rules and possibly higher healthcare costs.

A good strategy is to build detailed budgets for each case. Include sale proceeds (after taxes and fees), new mortgage or rent, taxes (federal and state), healthcare and living costs, and see which plan best meets your family’s retirement and care needs.

In general, experts suggest selling sooner rather than later if the market slows, since you can always rent or buy later; meanwhile, relocating out-of-state typically requires adjusting to new tax laws (you lose Prop 19 portability) and differences in cost-of-living.

How do California’s property tax laws (like Prop 13 and Prop 19) affect my choices?

California’s unique tax rules play a big role in any move. Proposition 13 (1978) means your property tax is locked at just 1% of your purchase price plus voter-approved assessments, and it can only rise about 2% per year. So, if you’ve owned your San Carlos home for decades, your current tax bill is likely very low compared to market value. That’s a big advantage to staying put or moving within California under Proposition 19.

Under Proposition 19 (effective 2021), homeowners 55 or older (or disabled) can move to a new home anywhere in California and transfer their old tax base up to three times. However, Prop 19 also changed inheritance rules: you cannot freely pass a property’s low tax base to your heirs except under strict conditions.

In short, Prop 13 locks in your low taxes now, and Prop 19 lets you keep that low base on a new California home (up to 3 moves) but it greatly limits heirs’ ability to inherit those low taxes.

Other Tax Implications of a Home Sale

When you sell your home, other tax rules come into play. On the federal side, if the house was your primary residence at least 2 of the last 5 years, you can exclude up to $250,000 of capital gain ($500,000 if married filing jointly) from income. That means many retiree-owners pay no federal capital gains tax on the profit of selling their long-time home. (Gain beyond the exclusion is taxed as a capital gain.) Remember to factor this in: if your San Carlos house has appreciated a lot, a large chunk can likely be tax-free under this rule.

Finally, remember that selling starts the clock: once you buy a new place, the 2-out-of-5-year rule for capital gains exclusion resets, and your Prop 13 base for that home will be its purchase price (unless Prop 19 adjustment applies).

What if I want to stay local but closer to family or leave the Bay Area entirely?

Deciding whether to stay in the Bay Area or move elsewhere is a personal choice with financial trade-offs. Staying “local” (or elsewhere in California) means you remain near family, friends and the services you know. Crucially, if you move to another California home, you can keep your low tax base under Prop 19. This helps your budget since Bay Area properties have very high market values. On the other hand, the Bay Area’s cost of living is famously steep. All else equal, moving to a more affordable region could stretch retirement savings much farther.

Some retirees choose to leave California altogether for lower taxes and living costs. For example, many clients consider states like Texas, Nevada or Florida, states with no personal income tax, which can significantly reduce their monthly tax bills.

Ultimately, you should compare monthly budgets. In short, local downsizing might save on taxes and keep you near loved ones, while moving out-of-state might greatly lower living costs (e.g. no income tax) but at the expense of your Prop 13/19 advantage.

Exploring Legacy Planning Options

Leaving Property to Heirs

If you plan to leave your San Carlos home to your children, remember Prop 19’s limits: the home will not keep your low tax base unless a child makes it their primary residence and the value is within Prop 19’s limit. In practice, many families find that passing high-value property to heirs triggers a tax reassessment. You may need to decide whether to let the home go to family (potentially resetting taxes) or sell it in advance and distribute cash to heirs.

Using Real Estate Creatively in Charitable Giving

Another route is charitable giving using real estate. For example, you could place the property in a charitable remainder trust, which lets you (or a loved one) receive income from the asset during your lifetime and then donate the remainder to charity. This strategy avoids capital gains tax on the home’s appreciation while still providing you with cash flow and a charitable legacy. Even simpler, you can name a charity as a beneficiary of your home (or your home sale proceeds) in your estate plan, which provides an unlimited estate tax deduction. By donating the home directly (or the proceeds), you get a tax deduction equal to its fair market value and remove the asset from your taxable estate.

There are trade-offs in every financial direction you may take. But clarity comes from aligning your decisions with what matters most to you. If you’re ready for a thoughtful conversation about your options, I’d be honored to walk with you through the process.

Ready for the Next Step?

“These aren’t just real estate questions; they’re life planning questions. The answers depend on your bigger picture: your retirement income plan, healthcare needs, estate wishes, and lifestyle goals,” Matt advised. That’s where Brio Financial Group steps in. Matt’s role as a Financial Advisor is to help you see beyond the “For Sale” sign and evaluate what a move means for your financial health and future security.

“We know decisions about your home aren’t just financial, they’re deeply personal. That’s why we take a holistic approach, looking at your values and your vision for the next chapter of your life, not just your balance sheet,” Matt says. “With expert guidance, you can navigate your options with clarity and confidence, making sure the place you’ve called home continues to support the life you want to live.”

And when Matt Beck isn’t helping clients make sound investment decisions you can find him and his partner, Mary, walking their two ‘teacup’ Yorkies in San Carlos. He did let us know that one tends to be overly protective and the other tends to give as many kisses as possible. Just be sure to ask which is which! 😊

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