When selling a house to pay for senior care, consider the timing, how it may affect eligibility for government benefits, and the emotions it can evoke. While some families may have the finances to pay for senior care readily available, others may rely on the sale of a house to pay for their loved one’s care. The decision to sell a house to pay for senior care will ultimately depend on a senior’s unique circumstances and care needs.
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Key Takeaways
- The best time to sell a house to pay for care will depend on the senior, particularly their care and financial needs.
- The sale of a house can impact a senior’s eligibility for government programs like VA benefits and Medicaid.
- Stay organized, be respectful, and focus on the benefits of moving to senior living, as selling a house can be emotional.
- Power of attorney may be necessary to help a parent with dementia or other health condition sell their house to pay for care.
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5 Things to Consider When Selling a House to Pay for Senior Care
- Timing
- Eligibility for VA benefits and Medicaid
- Tax implications
- Managing difficult emotions
- Legal authorizations
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1. Timing
The best time to sell a home will depend on each senior’s unique situation. Debbie Beard, a senior real estate specialist in Melbourne, Florida, regularly counsels families on the ideal time to sell a home.
“When I first meet a client, I look at their situation holistically,” says Beard. “How is their health? Why are they moving? It’s important to look at the whole picture.”
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Before moving to senior living
The main reason to sell a house before moving to senior living is to use the proceeds as the primary source of funds to pay for care. If a family chooses not to sell the home beforehand (or it doesn’t sell quickly), they must continue to pay home-related costs.
This could include the mortgage, taxes, utility bills, insurance premiums, and maintenance costs on top of senior living costs.
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After moving to senior living
There are several reasons why a family may wait to sell a house until after a loved one has moved to senior living. These typically include:
- Addressing an urgent situation. It may be better to move a senior quickly if there are signs they are unable to live alone safely. Hospitalization after a fall or a health setback may also necessitate a quick move to a senior care community.
- Updating or staging the home. It’s easier and less disruptive to paint or make necessary fixes in an empty house. It also allows the real estate agent to temporarily furnish and decorate in a way that makes the home more appealing to buyers.
- Managing stress. Seniors who live in their home throughout the selling process must keep it neat and ready for showings. They’ll also need to leave the home during showings and open houses.
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Use a bridge loan in the interim
A bridge loan is a short-term financing option intended to help homeowners “bridge the gap” between residences. This loan may enable a senior to take advantage of their home’s equity before it sells, freeing up funds to pay for senior care in the meantime.
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2. Eligibility for VA benefits and Medicaid
Selling a home could affect a senior’s financial eligibility for certain benefits. Those who currently receive need-based government benefits (or plan to apply in the near future) should carefully review the eligibility requirements and evaluate the potential repercussions of selling their home. For example, the VA pension and long-term care Medicaid programs have the following net worth and asset limits:
- To qualify for the basic VA pension in 2024, a veteran’s net worth (countable assets plus income) must be lower than $155,356.[01] The value of a veteran’s primary residence is not included in the calculation of their net worth. However, selling a house will likely increase a veteran’s net worth and could make them ineligible for benefits. The same rules apply to eligibility for the Aid & Attendance benefit, Housebound allowance, and Survivors pension.
- Medicaid qualification requirements vary from state to state, but many states set asset limits at $2,000 for an individual. A senior’s primary residence is exempt from this limit. However, selling it to pay for care could easily disqualify a senior from Medicaid eligibility until they spend down the proceeds.
Keep in mind that both the VA pension program and long-term care Medicaid program also feature a three-year and five-year lookback period, respectively. Gifting or selling assets (such as a home) for less than fair market value during this timeframe will result in a period of ineligibility for benefits.
An elder law attorney can provide legal guidance around selling a home and how it may affect eligibility for government benefits. Free legal assistance and benefits counseling may be available through local Area Agencies on Aging.
Read more: Assisted Living Benefits for Veterans: A Comprehensive Guide
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3. Tax implications
Whether selling a home will result in tax implications depends on several factors — namely the amount of profit made from the sale. Selling a house to pay for senior care doesn’t have to result in a hefty tax bill. In many cases, the proceeds from a home sale are tax-free. An individual can exclude up to $250,000 of the profits from the sale of a primary residence, while a married couple filing jointly can exclude up to $500,000.
The IRS requires that sellers meet the following conditions to qualify for the exclusion:
- The seller must own the house.
- The seller must have lived in the house for two of the last five years.
There are several situations when selling a home may result in the seller having to pay taxes. This includes when the seller doesn’t qualify for the exclusion, if capital gains from the sale exceed exclusion limits, or when the home is not a seller’s primary residence.
Consulting with a financial professional or real estate attorney can help to clarify all of the tax implications related to selling a home.
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4. Managing difficult emotions
Selling a house can elicit complex emotions. However, there are steps a family can take to make this a positive experience. Beard offers several tips for managing difficult emotions:
- Keep the process transparent. Everyone involved in the selling process should read any contract before a parent signs it. This minimizes confusion and helps all family members stay on the same page.
- Be proactive about organizing and downsizing. For Beard, painter’s tape and sticky notes are simple yet effective tools. To help seniors plan for their new home in a senior living community, she tapes out the size of each room on the floors of their current house. This helps them get a feel for the space, how they might decorate, and to decide what furniture and possessions they can bring. She also has her clients mark items with different-colored sticky notes, signifying which items to sell, donate, pass down, store, and keep.
- Emphasize the benefits of senior living. Seniors may feel stress about transitioning to a community. Talk with them about their concerns as well as the benefits, like a welcoming atmosphere, fun activities, new friends, and plenty of amenities. Ask a community representative for their tips to help smooth the transition.
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5. Legal authorizations
In certain scenarios, a family may need specific legal authorizations to help an aging loved one sell their home. A mentally competent senior can draft a power of attorney (POA), usually with guidance from an attorney, authorizing a trusted individual (or individuals) to act as an agent to help sell a home. An agent may be granted powers to help with logistical tasks such as reviewing and signing paperwork, or speaking with a realtor or attorney.
If a senior is no longer competent to make their own decisions, but they already have a POA in place, their agent can legally get involved with selling the home. If the senior doesn’t have a POA, then a family member or other trusted adult must petition the courts for guardianship to get involved with the sale of the senior’s home. It’s important to note that petitioning for guardianship is a more complex, lengthy, and expensive process than establishing power of attorney in advance.
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Checklist for selling a house to pay for senior care
Knowing what to expect when deciding whether to sell a parent’s home to pay for care can be helpful. Our checklist can help seniors and their families prepare:
- Decide on an ideal date to sell. Spring is typically prime home-sale time, so consider seasonality when planning. If possible, use the preceding winter to complete any repairs, updates, and deep cleaning. Beard suggests that families set goals and realistic timelines for preparing the home to sell.
- Find a trusted real estate agent. An informed real estate agent can make all the difference when selling a home to pay for care. Families should seek out realtors experienced in working with seniors, says Beard. The realtor should know how to coordinate an estate sale, hire packers, and/or work with a senior move manager. A realtor will also work with a seller to determine a reasonable asking price. In addition to searching online and asking for personal recommendations, consider using the National Association of Realtors’ search tool to find a realtor.
- Consider home improvements. Beard recommends a pre-listing home inspection so sellers can make needed changes and avoid unexpected problems. A pre-inspection identifies any significant safety and mechanical issues that may jeopardize a sale.
- Gather necessary documents. Before putting a house on the market, the seller should have access to key documents like the homeowners insurance policy, the original sale contract, maintenance records, warranties, home owners association (HOA) records, home appraisals and inspections, and utility bills.
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Next steps
Consider consulting with an elder law attorney. They can answer questions about whether it’s financially beneficial for a senior to sell their home.
Working with an accountant or tax attorney can also be a helpful next step. These professionals can offer guidance around the local, state, and federal tax implications for selling a house.
This article originally appeared on APlaceforMom.com and was syndicated by MediaFeed.org.
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