Postponing / avoiding capital gains tax.

These days reverse mortgages are regulated, so they are no longer the ripoffs they once were. But they are limited, so I doubt your relative could get anywhere near $5,000 per month with one, even if he qualified for one.

He could retain a life estate in the property and donate the remainder interest to a charity in return for an annuity. That would eliminate the capital gain tax, but he's still not likely to get anywhere near $5,000.

For the amount of money he needs, the only thing I can think of is for him to turn the property into a rental. If he can't get that amount of money from it as a residential rental, he may be able to exchange it for commercial property that would give him about that. A six percent return on good qualify commercial property is not unheard of.

I'm assuming the three siblings will be the ultimate beneficiaries of Adam not paying the Capital Gains taxes so this is really their problem. They can choose to loan Adam $5K/month until his death or choose not to. If they don't go the loan route (the default choice), Adam sells the rental property, pays the Capital Gains tax and has more than enough cash left over to pay expenses during the remainder of his life. If they go the loan route, they will get all their money back (plus interest) in a couple years and also inherit an estate that is $110K larger. To me, the loan choice seems obviously better but if the siblings don't want to do this, Adam should just sell the rental property.

I agree, with the possible twist of the siblings making gifts to Adam to avoid some or all interest income/expenses, should that be of benefit.

Adam has three siblings. He would need four (or they would all have to be married and living in community property states) if they wanted to avoid having to file gift tax returns.

Going the gift route may end up being too clever by half. When the siblings make the "gifts" to Adam, they are doing so with the expectation that they will get their money back in a couple of years when Adam dies. To me (and the IRS?) that looks a lot more like an interest free loan than a gift. The last time I looked, the applicable federal rate for this type of family loan was around 2.5% so the tax cost of the siblings declaring interest income from the loan should be fairly minor.

"avoid some or all interest . . "

And, if the siblings pay for Adam's medical needs, directly to the provider, does this avoid the need to file gift tax returns?

And, the siblings might not have many assets for them to worry about having to pay a gift tax or needing to maintain their full estate tax exclusion.

If each of the siblings pays at least the excess over $15,000 each per year directly to medical providers, then they can avoid filing gift tax returns.

It is highly unlikely that any of them will actually ever owe any gift tax. But just filing the 709 can be a headache, so why do it if you don't need to?

There are no issues with the IRS. There is no guarantee that the siblings will inherit anything from their brother (even if a current will names them as heirs). There is no guarantee that Adam will die within 24 months.

I agree that the "no guarantee" issue should be decisive when there truly is no guarantee. If Adam promises his siblings they would get the money back via inheritances (even if just done orally), that could complicate things.

The "no guarantee" issue points to the biggest reason I dislike the gift approach. Now that Adam has a fairly short life expectancy, it would be normal for him to reassess how he really wants his estate distributed. Absolutely nothings stops him from making changes that leave his estate to charity, relatives other than siblings, friends, caregivers, or almost anybody else. If the siblings want to maximize the likelihood that any funds they supply are used to retain the rental property AND they want to be sure they are paid back, they should structure the transaction as a loan, not a gift.

I am in the midst of a close relative dying. There's more to life than taxes. Do it as a loan so no one gets screwed.