Selling one’s home to pay for long-term care is one of the biggest decisions seniors and their families will have to make. Unfortunately, it’s a reality currently being faced by millions of people across the country.
In fact, a report prepared by the National Association of Realtors found that more than half of home sellers in 2019 were over age 55. If you’re one of the millions of seniors aging into long-term care, it’s crucial to review your options so you can plan for the care you deserve.
It’s challenging to know the right time to sell your home and begin your next chapter. By the end of this article, we hope you’ll have a better understanding of the paths available to you so you can feel confident in whatever decision you make.
When Should Seniors Sell Their Home?
It is common to sell your house to fund the transition into an assisted living or nursing home facility, but it’s far from the only option. It may feel like the most natural choice since you are moving anyway. Selling your home before or during the transition into long-term care is an excellent option for most people, especially if you need the money to bankroll your new living arrangements.
Another option to consider is keeping your home and renting it out. This choice might make sense if you can fund the cost of your care facility with other assets such as your retirement accounts or other investments.
If you decide to rent out your home instead of selling it, make sure to take into account the costs involved. Expenses such as property management and maintenance can add up quickly. Additionally, choosing to keep your house means you will need to continue paying your real estate taxes and homeowners insurance premiums.
What is the Capital Gains Tax for Seniors Selling their Homes?
If you decide to sell your home to pay for senior care, you’re probably curious about the taxes involved. The good news is, there’s a good chance you won’t get hit with a hefty tax bill. Due to favorable tax laws, many homeowners end up owing nothing or very little capital gains taxes upon the sale of their home.
As of 2021, an individual can exclude $250k in gains from the sale of their primary residence. For married couples, the profit that can be excluded is even higher, at $500k. The only requirements are that you need to be the owner of the home, and you need to have lived at the property for two of the last five years to qualify for the exclusion.
Can I Sell My House Before Going Into a Nursing Home?
The most common question seniors ask about the transition into a care community involves timing. For example, you might be wondering whether it makes sense to sell your home before or after moving into a care facility.
The main reason to consider selling your house before moving into senior living is if you can’t afford to fund the transition any other way. For many seniors, the equity in their home is their most substantial asset. Therefore, the best option is to sell their home so they can afford the move to a care facility.
Another option to consider if you need to move into a care facility immediately is applying for a bridge loan. Bridge loans are a type of short-term financing that allows you to access the equity in your home before it officially sells- which frees up money you can use to pay your care costs right away.
If you decide to take out a bridge loan, be aware that the lender will require that you have at least 20% equity in your home and that the loan may carry a higher interest rate than other types of financing options.
One reason to consider waiting to sell until after moving is if there is an urgent reason to move into senior care. This may be the case if you’re no longer able to live alone safely, for example, due to an injury or illness. In this situation, it’s best to put selling the home on the back burner and prioritize getting the care you need.
Can I Be Forced to Sell My House to Pay for Senior Care?
What people usually mean when they ask this question is: Can Medicaid take my home? This is a concern many seniors have if they are using Medicaid benefits to pay for the costs of their care.
The simple answer is no, Medicaid does not have the right to take your home. However, they may have a future claim on your home to recoup the costs of care that they covered.
Medicaid can stake this claim by putting a lien on your house for the cost of care they paid for. When your property is eventually sold, Medicaid may come to collect on the lien. Fortunately, you can take steps to safeguard your home against claims like this, which brings us to our next point.
How to Avoid Selling Your Home to Pay for Care
There are several ways to protect your home against creditors, such as gifting your home to a family member or charity or putting your home into a trust. It’s best to consult with an elder law attorney in your state to develop an estate planning strategy that suits your specific needs.
Final Thoughts
The transition from independent living to assisted care is an emotionally and financially trying time for seniors and their families. We hope the information we’ve shared has provided clarity on your options and helped alleviate some stress from the process.
We Can Buy Your Home For Cash Fast
If you need to sell your home to pay for care fast, let us help. We are reputable home buyers that have been able to help thousands of people in Massachusetts and New Hampshire sell their homes quickly for a fair cash price.
Get your instant cash home offer or give us a call anytime at 781-309-7085.