Selling a home is one of the most popular options for aging adults looking to finance senior living. In fact, people older than 55 accounted for more than half of all home sellers in 2019, according to a report from the National Association of Realtors.
“If an individual’s going to need to transition out of their home into some type of long-term care, then they may be moving anyway,” says Michelle Ash, a certified financial planner in Jacksonville, Florida. “Selling the house and freeing up those resources is a great way to help provide funds in order to pay for that.”
Debbie Beard, a senior real estate specialist in Melbourne, Florida, was inspired to work with older adults selling their homes after a career as a senior living executive director. In her position, it was “extremely common” to meet seniors who had sold their home to pay for care, she says. Nevertheless, the experience came with deeply personal challenges for each family. “Working with seniors is complex and emotional. Many seniors have lived in their homes for 25 or more years,” says Beard. “It’s the whole process of the unknown. They don’t know what it’s going to be like in assisted living, away from the home that carries their memories.”
Despite these intense feelings, selling a parent’s home to pay for care can easily be a positive and smooth experience. Whether you’re selling a house to pay for assisted living, memory care, or a nursing home, learn must-have resources, what to expect financially, and crucial steps to take.
Whether you’re a senior or their family member, selling a house can be a complicated decision. In particular, those involved may wonder about planning and timing. Should they sell the house before or after a move to senior living?
“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.”
Questions like these can guide the process, as well as help establish a timeline. Beard recommends seniors and their families consider a few key factors, such as financial needs, stress, and timing.
The main reason to sell BEFORE moving to senior living:
Reasons to sell AFTER moving to senior living include:
Though each of these factors plays a role in deciding when to sell, families must determine which to weigh most heavily.
Most commonly used for real estate purposes, bridge loans are a short-term financing option intended to “bridge the gap” between homes. They enable sellers to take advantage of their home equity before their house officially sells, freeing up funds to pay for assisted living in the meantime.
To apply for a bridge loan, seniors must have at least 20% equity in their home. While bridge loans are convenient, they have higher interest rates than other types of loans. Also, the loan period is short, generally six to 12 months. Seniors and families can consult their banker or financial adviser to find out if a bridge loan fits their needs.
Seniors who receive financial assistance from the government — such as VA pensions, VA aid and attendance, or Medicaid — should carefully evaluate their options and the potential repercussions of selling their home. The programs have the following net worth and asset limits:
Contact an elder law attorney in your state to learn more about selling your home and government benefits. Your local area agency on aging may offer free legal assistance.
Selling a house to pay for assisted living doesn’t have to result in a hefty tax bill. In fact, in many cases, the proceeds from a home sale are tax free. Specifically, an individual can exclude up to $250,000 in profit from the sale of a primary residence, while a married couple filing jointly can exclude up to $500,000, according to the IRS. Seniors must meet two conditions:
After deciding to sell your family member’s house, define milestones and goals, suggests Beard. She notes that the process can often take four months.
When I first meet a client, I look at them holistically. How is their health? Why are they moving? It’s important to look at the whole picture.Debbie Beard, senior real estate specialist
Before listing, seniors and their families should:
Before putting a house on the market, seniors or their families should have access to:
Memory loss adds an extra challenge for seniors and families putting a house on the market. Unless valid paperwork states otherwise, only the home owner can transfer the home to a buyer. However, two legal designations — power of attorney and guardianship — can empower adult children to make decisions for their ailing parents.
Power of attorney (POA) can help a trusted adult child or other family member fulfill a senior’s wishes. Real estate decisions, like selling a house to pay for care, count among the main reasons families set up this legal designation.
To set up power of attorney, the senior — or “principal”— must sign a document granting a person permission to make decisions on their behalf. Though power of attorney is often simple to establish, there are a variety of types. An elder law attorney can answer specific questions and streamline the process.
It’s best to set up power of attorney in the early or middle stages of dementia. If deemed incompetent, a senior will be unable to execute power of attorney. In these cases, families can petition for guardianship to sell a house. They’ll have to prove their senior loved one has significant memory loss, requiring a legal guardian to manage any property. While petitioning for guardianship can be a crucial last resort, it’s a more extensive, lengthy, and expensive process than establishing power of attorney.
Whether or not a family member has dementia, the selling process can awaken complex emotions and arguments.
It’s the whole process of the unknown. They don’t know what it’s going to be like in assisted living, away from the home that carries their memories.Debbie Beard, senior real estate specialist
Nevertheless, Beard has several tips for lessening the stress and potential upheaval.
An informed real estate agent can make all the difference when it comes to selling your parents’ home to pay for care. Above all, families should ask, “How many seniors have you helped?” says Beard. A realtor experienced in working with older adults may help families navigate the selling and downsizing process more smoothly.
To find a designated senior real estate specialist in your area, search the National Association of Realtors database.
An elder law attorney can answer questions about guardianship, power of attorney, and whether it’s financially beneficial for a senior to sell their home. The National Academy of Elder Law Attorneys maintains a list of member lawyers.
A Place for Mom’s Senior Living Advisors can help assess your family’s specific situation, send you information about different types of senior living, discuss various payment options, and connect you with local communities.
Internal Revenue Service (IRS). “Topic No. 701 Sale of Your Home.”
International Risk Management Institute. “Managing the Risks of a Vacant Home.” https://www.irmi.com/articles/expert-commentary/managing-the-risks-of-a-vacant-home
National Association of Realtors. “Home Buyer and Seller Generational Trends.” https://www.nar.realtor/research-and-statistics/research-reports/home-buyer-and-seller-generational-trends