My 90yo mother fell and broke her hip. She is now in a skilled nursing center and can be released in a few weeks.
So… My Wife and I and my mom do not think she will not be able to live alone at home any more. My mom is cool with this. I live 100 miles away, and it’s just not going to work. I can only do weekends. She broke her other hip 4 years ago.
The question is, when we sell her house to support her $5000 a month assisted living, will we have to pay capital gains on it? Could that money be put into a trust that goes to her assisted living care?
Ideas and opinions welcome. And yeah, I’m probably going to contact a real estate attorney.
Do you have an idea of how much profit the house will bring? Not all of the profit will be taxed. Look at these guidelines: https://www.irs.gov/taxtopics/tc701
I can’t advise on capital gains, but if someone owns real estate and is old, it absolutely should be owned not by them but by a trust in their control.
I agree. The level of the question implies limited research so far which might have missed more important and potentially more complicated questions about this situation than just whether capital gains tax would be due if the house was sold to pay for assisted living (which is fairly simple as others said, if the person has lived there a long time as single filer, the first $250k of cg would not be taxed).
I also agree and would just add it can be as much an issue for potential heirs as the homeowner herself. Owning the home doesn’t necessarily affect eligibility to get Medicaid to pay some of the assisted living cost now (with a home equity limitation of $572-$858k depending on state, house in same state in which you apply for Medicaid). The issue then becomes Medicaid’s right to make a claim on the house to recover their costs after the person dies. There are legitimate structures to protect the house’s value for heirs.
They house was bought in 1976. My mother owns it free and clear. I have power of attorney for my mom. So that will help a lot.
The house is worth ~$500,000 or so. That should keep her good in assisted living until she’s 100 years old. She, and I don’t think she will last that long. We can be frank about this stuff.
And of course the numbers get blurry after about 5 years.
Besides being an art historian, with a masters in art history and an excellent artist, she was a comptroller for a large health club corporation.
Your eldercare attorney will know the specifics of where you live, but in some states Medicaid pays for assisted living too. I know this because I had to do all of the paperwork to get my parents qualified. We’re in Oklahoma. The state pays about 7/8ths of the cost and the rest is paid out of their social security.
I have found this site to be an excellent resource for help with elder care. We used them recently for my mother-in-law. You can find people to help with assessment of the best living arrangements for her, for example.
You should NOT contact a real estate lawyer. You need a specialist in elder care. This stuff is very complicated and requires a detailed inspection of all her financial assets for the previous seven years. Get professional help now,from both lawyers and tax accountants who are experts in elder care.
Thanks again everyone. Kind of wonder how to find an elder care attorney/specialist. I’ve never needed a lawyer. I could just start Googling, but…
I think maybe contact Social Services? In the county that she lives? Perhaps they can point me in the right direction. Although I know they won’t be able to recommend a specific person.
I, myself, work for a different county government then where my mom lives. I may be able to get some advice there too.
Thank you Sunny, I’ll be looking at that. Got some digging to do.
The good news is that my Wife and I feel that we have found a great place for my mom (It’s really, really nice). And by selling her house, she should have enough money to live out her life there. And, it’s not a total commitment to this place. It’s month to month. We are going to take her there next Friday to see if she likes it.
She’s still very sharp, and a very independent, private person. She is understandably nervous about this.
That’s great you found a nice place, it should be a huge weight off her shoulders. Do you have to sell first before she can move in?
TIme to get your ducks in a row now, I would start here National Academy of Elder Law Attorneys I found a very capable attorney for my folks from this site. You may have to travel outside your area most likely but worth it IMO. You may have to update your POA if it’s not “durable”, set up a trust with funds from the house sale, etc etc and get a greater understanding of medicaid rules and medicare allowances for Assisted Living.
It’s an eye opener, my famiy was not well informed at first and was looking at reverse mortgages and ridiculous options to fund AL, elder law attorney set us straight before we screwed it up.
Please check with a CPA or tax advisor on this, but if your mother is a widow and owned the house jointly with her husband, she might have inherited his half of the home when he passed, which may effect the cost basis of the house and possibly reduce the capital gains when she sells.
chela and dag - Mom owns her home outright and there is no issue re widow. She divorced in 1975. She bought the home on her own. I have POA, and have to check if I may also be on the title to the house. I’m thinking that she should quit claim it to joint ownership.
She has enough ‘cash’ on hand in bank accounts to set her up for at least 2 years at a very nice assisted living place. So, while there is no rush, it has been recommended to get her set up sooner than later. She can use a walker, and is still sharp. Mom agrees.
I’m having a hard time keeping all these balls in the air. I’m still working, and have my own house to take care of. My dear wife is a real estate appraiser but can’t legally appraise the property due to ethical reasons. My Wife is my rock. An IronMan (the race, not the movie). She sure has an idea what it’s worth though. We are good there as far as funds. Provided mom doesn’t live past 100.
My mom lives 100 miles away, so I can do weekends. I have a cousin that can help that lives closer and keep an eye on her house.
I’m managing her bills and stuff. Actually in a good position.
Listen to everyone here. DO NOT sell your house until you have consulted with an elder care attorney.
Do not assume that the proceeds from the house will keep her in a good nursing home for a long time. Nursing home bills can vacuum out a typical nest egg in a short period of time. If she declines and needs specialized or memory care you could be looking at $25,000 a month.
Once all assets besides the house are exhausted, you probably can apply for Medicaid. You may have to forfeit the house to repay Medicaid after she’s dies but remember:
The house will probably be worth more then that it is now.
Nursing homes are like any other healthcare. The private pay rates are insanely inflated. If the house is sold to reimburse Medicaid, you will be reimbursing them at the Medicaid rate, not the private pay rate.
Seriously, DO NOT SELL THE HOUSE UNTIL YOU HAVE CONSULTED AN ELDERCARE ATTORNEY. I’ve been there. I’m keeping the advice general because IANAL and I live in a different state but you need to do this.
Several people have mentioned Medicaid nursing homes.
If Mom does go into such a place, they require the house to be sold and the proceeds used to reimburse Medicaid for the costs. If she had a living spouse still in the house, it would not have to be sold until the spouse was no longer living there. I’m pretty sure that you could not hold onto the place on her behalf while she was in the Medicaid facility.
However: people talk about transferring the house away, to preserve it from Medicaid… but a) there’s that 5 year lookback (so if she needed assistance in the next 4 years and 11 months, it wouldn’t work), and b) if it were me, I’d want the proceeds to be used to keep my parent in a nicer facility than whatever Medicaid funded.
IANAL, but I hired a good one that assured me that in my state at least, the family home is safe while the parent is alive. As unlikely as it is, he said there was a presumption that the parent might recover enough functioning to return to the home.