Preparing: Sell the home to pay for care or?

mangoprincessMarch 3, 2007

I am sure at some point, this question has been asked, but I need to know what is advised for the following question.

I have all documents in place, health directives, Will, Power of Attorney.

In the event I lose one parent, and the other survives, and wishes to sell the home, and move into a much researched, independent living/assisted home, would it be wise to sell the home to pay for her rent for the remainder of her life? (I am choosing one parent here, just as an example), or would it be best to wait until she passes to save the siblings the taxes they would be subject to, if the home were to be sold prior?

Anyone deal with this before? If the home were not sold, how would we come up with the money to pay for her rental, as I understand Medicare doesn't pay beyond a nursing home, should a loved one end up in independent or assisted living?

Will the dear government intrude or care if there are assets, when our parents are on Social Security and Medicare? Does this effect their benefits? I do need to know this. I know with Welfare, such as AFDC, you cannot own a home and collect benefits. Any help would be appreciated, from those of you that have gone thru this before. I am in California, if it makes any difference.

We want to avoid problems and liens.

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To avoid problems in the future, you really need to consult an elder law attorney. I'll include a link to the fellow who does a radio show on KGO in the Bay Area.

If your parents sell the house while both are still alive, they have a $500,000 exemption from taxes, only the rest of the capital gain is taxed. Don't quote me, but I think that when one person dies, the other inherits the property at the stepped up basis, or what the property is worth as date of death of the first one.

Whatever you do, establish a trust and put all assets into the trust. I just closed out my mother's estate, and having a trust saved us probably $15,000 in legal fees on a $200,000 estate, no probate, very easy to handle.

Check out this website and read some of the articles that he has written.

Here is a link that might be useful: Len Tillem

    Bookmark   March 3, 2007 at 9:36PM
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Don't cross the bridge until you get to it. The remaining spouse may have problems by that time that would make a nursing home more feasible than assisted living. Make your plans, but be prepared to change them
Their assets would have no bearing at all in regards to Social Security and Medicare. Nothing you do about the house will change that.
Usually, a nursing home will take the Social Security check, and apply it to the monthly fee. The family or other sources will make up the balance. Have you thought about renting out the house? Rent plus Social Security might be the way to go if it looks as if he/she doesn't have much time left. Then the family gets the house at market value at the time of death.

    Bookmark   March 4, 2007 at 9:08AM
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Thank you both. Very good advice, but I do agree with you agnespuffin. While I do not know who will outlive who, as both are still alive, my parents want to do things differently. They don't want to leave their home to their kids that will be near 60 when they go, they prefer to sell it (and yes that is correct, the surviving spouse inherits the property), and let us siblings split the money and go buy our own homes. We are the sandwich generation, the generation that rarely has a home paid for that hasn't been re-financed, if you know what I mean. My parents can't fathom why folks leave their homes to their kids upon their death? They prefer to let us have the split if one survives, then we decide where that surviving parent will reside, with money saved of course.

My family is old fashioned, and they dont' care for attorney's or what they charge or keep for that matter. We have looked at both trusts and wills, and a will is what we have, as a trust is geared more towards lots of assets in the estate. I researched both, I know it for a fact. My parents have less than $5000 in the bank, live off of social security. The only thing they have is the home in one of the wealthiest parts of CA, on the ocean, now worth $1.2 million, that is it! We basically wanted to record their wishes, which is why the will is in place. Renting out the home would be something none of us want to deal with, so selling it at high market value, is all we are considering should something happen.

True, it may need to be a nursing home, but because my mom would like to live in those new independent type living structures, my father is dead set against leaving his home, which is larger than they both need and lots of headaches just to keep up with it. If my mother survives, she alone may not do well in an independent / assisted living home, because she isn't a socializer, and suffers from deep depression. No matter how appealing those homes are to her, I can't see her surviving there.

At least we have a good sample right now. My mother's sister, my aunt Gloria. Just like my mother, both suffering from self inflicted depression, no social skills, very little English language (both were immigrants at one time), and have never driven a car before. I see my cousin dealing with my aunt who just hangs around all day and does nothing. While my mother is the more complicated in personality, of ALL of her several siblings, none of us can see bringing her in either of our homes, no matter where she goes the depression would escalate and shorten her life, is what I am assuming would happen, given all I know about her ways. I have to paint this picture here, if I don't, then I would be in denial.

Very true though, there will be bridges to cross and we are prepared for making a quick change if need be.

We know that wills are subject to probate, but my parents preferred that document over a trust.

    Bookmark   March 4, 2007 at 12:08PM
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I absolutely agree with Fairegold that the assets should be placed in a trust as soon as possible. Laws on this subject are changing quickly and "look backs" are being lengthened.

Social Security and Medicare are independent of assets. It is only when the assets have been exhausted that Medicaid kicks in.

The present sentiment surrounding estate planning is that people are trying "hide" assets. Some may be. But the practical reality is that a trust and the legal documents for "health directives" and powers of attorney will allow you to move/liquidate assets to pay for LTC should it be needed. And if it is not, you will inherit cleanly, easily, and with minimal cost.

See an attorny skilled in Elder Law and do it soon.

    Bookmark   March 4, 2007 at 12:19PM
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The probate on a $1.2M home will probably cost you $30-$50K in cash in attorney and court fees. The handling of the house under a trust will be a fraction of that. You decide which is the better "deal".

    Bookmark   March 4, 2007 at 1:11PM
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I urge you to read the articles linked to the thread started by jkom51. It tops the list of topics when you look at the Caregivers forum. They're excellent.

Do it soon and move on this stuff IMMEDIATELY.

    Bookmark   March 4, 2007 at 4:42PM
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The probate on a $1.2M home will probably cost you $30-$50K in cash in attorney and court fees. The handling of the house under a trust will be a fraction of that. You decide which is the better "deal"."

Very true, we knew that, but we also know that many Attorney's want to be named Trustee and that eats up more of our money. Many banks want to be Trustee, and when I researched this, the bank told me that 'we don't know' what needs to be done and that is why they are there. Banks don't do it for free, they will pay themselves thru the Trust. What I neglected to mention, was that my Uncle passed away and left my mother as Trustee in his L.T. I tried to help her with this, but neither of us have law experience, and we had to hire an attorney at $300/hr to help us file what needed filing, transfer of my Uncle's mail to my mother to pay bills, and everything else, as we were clue-less, which only makes me think of what the banker told me, that in fact many people are left with a L.T. and don't know what needs to be done. My Uncle left his bank accounts on Pay on Death status, so my relatives were able to get the money quickly. Lawyers hate this! I have been told they don't want you getting money that quickly, as they want it left in the Trust.

While I can 're-investigate' a Living Trust, once again, compared to the Will we have, which is better than nothing, my father is extremely difficult..very very abrupt man, and will not get in the car to to to a legal office which is why I downloaded the original Will, in which I had him feed me the information, verbally, so I could document it for him, then got it notorized. Again, I have 2 living parents. One will be left, and that one will want to sell the home, which is why they don't want to put in a Trust, thinking it will cause difficulties. Anyway, I can re-think things, and if I went with a Living Trust instead, how would I transfer the home? Can I do this with my Power of Attorney document? Remember my father will not do it, and his name is on the title. He causes major difficulties for all of us. He is not like everyone else, unfortunately.

Believe me, I had to force my mother to hire this lawyer when my Uncle left her (big mistake), as his Trustee, because she sat in her rocker for 5 weeks and did nothing as the beneficiaries were waiting for results. My mother is the one with limited English, and had no understanding of what needed to be done, while my Uncle's home sat abandoned for weeks. Then my mother tried to fire the attorney and said the heck with all of this.

Please understand, that I appreciate all the help I can get, but if I can do all of this without putting either parent in the car, with my Power of Attorney doc, then I can do it, otherwise, they are very uncooperative.

    Bookmark   March 4, 2007 at 8:50PM
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You REALLY need to speak with an attorney. And you need to do it soon. Your parents are woefully ill-informed about what's going to happen when one of them dies. A qualified attorney will explain it all.

My mother was HORRIFIED when she was told she couldn't simply change the names on the deed to her home to ensure its lawful transfer. She waited too long to do that! I'll bet your parents have NO IDEA ABOUT "stepped up basis" and the tax implications. they honestly think they've "taken care of it", just the way Mum did.

You need someone NEUTRAL, an attorney that represents THEM! to explain it all. Are your parents fluent in English? if they aren't, hire a translator or find an attorney fluent in their tongue. Oftentimes, difficulty with the native language breeds fear and distrust.

    Bookmark   March 4, 2007 at 9:37PM
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If I could act as trustee for my mother, then anyone can do it. You do not hire a bank or an attorney to do such a task.

Like everyone else says, you are the one with a lot of misconceptions. I can understand that your parents are difficult, but you do not seem to understand the process at all.

It's time for you to do some homework.

    Bookmark   March 4, 2007 at 9:43PM
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This thread has prompted me to read through my parents' trust documents... mainly because I never have before and also to familiarize myself with the language for establishing my own revokable living trust.

Mangoprincess: do read the articles linked by jkom51 and fairgold's Len Tillem link.

The biggest hurdle you're facing now is your parent's (particularly your father) resistance. If we can assume that the idea of them establishing trusts is off the table, at least for now, what you have done in helping them with a will, having their financial POA, etc. is just about all you can do at the moment.

In the event your father should predecease, and the entire estate passes to your mother, then I would look into a trust for her continued maintenance since you indicated she would be easier to deal with regarding alternate living arrangements, etc. It would be much less complicated if the will you assisted with named your mother sole beneficiary and if you did one for your mother, hers named your father as sole beneficiary. If you and your siblings are also named as beneficiaries, the house could be sold and the proceeds split X number of ways - effectively reducing that share of potential funding for alternate living or long term care. That being said, wills are private affairs and however one wishes to disperse their estate is totally up to them.

Definitely keep your mind open on the revokable living trusts. Financial officers at banks or attorneys MIGHT be named as trustee ONLY in the case of a person who has no close or trusted relatives. In your case, it would be logical that you or a sibling would be named trustee. As far as duties of a trustee - they'd be minimal if your parents were still capable and interested in managing their own finances. There would be even less to do if there is no wheeling and dealing with assets, buying or selling stocks, etc.

Should this come to pass, you do need to see a lawyer who specializes in Estate Planning and Elder Law - not just any attorney who draws up wills.

So, from my experience: ( and fortunately, my folks were financially savvy and more than willing to tie up their end of life affairs, etc.)

1. They listed and equally divided their assets; each established a revokable living trust naming each other as sole beneficiary with my brother as trustee. And as long as they were able, they managed their own trusts.

2. On death, the survivor had his/her own trust plus the other trust for his/her maintenance. In our case, my Dad predeceased and his trust was retitled to a Family Trust but still for the benefit of my mother's care.

3. My brother enjoys managing finances so naming him trustee was the logical choice even though I was close at hand. The trusts generate interest and dividend income which is plowed into short term treasuries or a block of stock or whatever seems like a good investment. Mother's LTC expenses are paid from the trust as are the property taxes and trust income tax returns. Her Federal employee survivor's pension goes into a checking acount which I hold in joint and use only if she should need an article of clothing or to fund up her hair salon account, etc.

4. I will have some house questions myself. The trusts have a "pourover" clause to capture anything that was left out, and I believe thus far the house is held outside the trusts.
My brother isn't particularly interested in the family home. I want it and will simply buy him out when the time comes.

This is all a big learning experience. You can only help to the extent you're allowed to. We've dealt with a few elderly relatives who really left messes. It's not that they didn't have access to good advice; end of life affairs weren't high on their agenda and they simply believed that somehow someone "would do the right thing" on their behalf whether they spelled it out or not.

    Bookmark   March 5, 2007 at 2:48AM
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I have one problem with some of the advice in this thread. OP stated parents "can't fathom leaving the home to children". They have stated their wishes and it is being ignored with the advice. It sounds like they want to pay for their own care. I too would want to pay for assisted living/LTC if I ever need it and I sure would be upset to find out children/heirs disagreed with this and would seriously consider removing said child/heir from my will. To the Orig poster you may not be able to avoid a lien in the event mom needed LTC and dad stayed in the house. I may be wrong but I believe up to 1/2 of the value of the home could go for her care but they would not force sale while dad was living in the home.

    Bookmark   March 5, 2007 at 11:44AM
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I think I understand your concerns, and I agree with all the above advice to consult a qualified elder care attorney--for your own peace of mind and education. He/she should be able to answer most of your questions and give you good advice. Yes, an attorney costs money. But if you find one you trust, their impartial advice, their expertise, their knowledge of the law, their looking after your needs first, etc. is worth every penney.

My mother has a wonderful & competent elder care attorney. I know that I can call him with questions and make an appointment to discuss any changes in her situation. I also know that when she dies, he will give me advice and take me through every step personally. That peace of mind is worth a lot to me. I know I can count on him.

Just having documents -- wills, trust, power of attorney, whatever -- is not a guarantee that everything will go smoothly.

If you could find a qualified elder care attorney, you could explain your parents' situation, their hesitancies, and your concerns. The attorney could give you advice that would work for their unique situation and their wishes. This is something you could do on your own before ever attempting to involve them.

    Bookmark   March 5, 2007 at 3:40PM
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I don't know if it's being ignored. The OP has parents with seemingly two different views right now - the father wants to stay in the home while the mother might be willing and able to acclimate in an adult apartment community or assisted living situation. If plans change and the parents decide to sell the home, the proceeds should go to for their living expenses in a new residence, not be given away to children so the children can buy houses of their own as the OP stated was what the parents really want to do. Not sure where the hint was the parents didn't wish to pay their own way with their available assets - but then they can't realistically give away their assets, can they? The idea was never promoted that the OP and her siblings were more interested in inheriting than seeing to it that the parents were able to pay their own way.

Seemingly, the parents have a little rethinking to do, and the rethinking is what may not be possible. If they don't want to leave the actual house to their children, but rather prefer to sell it and divide the proceeds among them... what are the parents going to use for rent and/or living expenses?

The only pitfall I see is - and again I reiterate - wills are private matters! If the proceeds from the home sale, combined with other estate asssets are bequeathed beyond a surviving spouse - assets for the maintenance of the surviving spouse would be diminished. California has a high cost of living - I wouldn't hazzard a guess as to the cost of apartment rents, assisted living facilities, etc. Being able to go through a fortune in a short period of time isn't too far-fetched.

One thing may have given short-shrift - Trusts are not right for everyone. This is where a qualified estate planner should be brought into the picture.

    Bookmark   March 5, 2007 at 3:55PM
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Yes duluthinbloomz4, most of what I said was ignored. I clearly saw that.

With my Uncle's estate, I had the opportunity to discuss, my parent's issues,
with the attorney. He also stated clearly, that a TRUST IS NOT FOR EVERYONE.
My deceased Uncle's estate was enough money to be able to put into a Trust,
where as my parent's, regardless of the home value, is not, and a Will is better
than nothing. No where do I indicate that my siblings, nor I want to put ourselves
first, given that we grew up with very little money, once upon a time, when California
was not yet glamorized, as it is now. BTW, very few homes n Santa Barbara, CA are less than 1 million. A studio apartment is $950 per month. A 3 bedroom home rents for $2500 and up, and they dislike pets in this town. There are very very few places that are even pet friendly, to add to the problem.

Many of my parents' neighbor's have sold their homes in order to pay for the
retirement 'after', as in assisted living or other. Mind you, not everyone ends
up in a nursing home. If you live in Southern California, especially in front of the
ocean, it makes sense to sell your million dollar home in order to have more
money for retirement. I maintain my mother's bank account, and don't tell me
that married people don't have separate bank accounts, because that would be a lie!

My difficult father on the other hand will only allow me to assist, only if
he can't do it himself. My rapport with him is far different than that of his and my mother, in which there is role playing. This is when she should be stronger,
but she isn't, so their differences, just keep going on and on.

They DO have every intention of paying their way, but with a home so valuable in
such a celebrity studded area, why not wave it in the air, call your price, and take
the money and have more for retirement, rather than sit on the gold mind, as they do now. The Realtors keep knocking on the homes of those such as my parents, hoping to get them out of there so they can make their commissions and bring in new people. There are very few homes that are even for sale in this area because it happens to be very desirable.

But, as long as my father is alive, nothing will change, that I can see unless push comes to shove.

There is no one that can dictate what anyone's parents do, and if they decide to share
a portion now, while they are alive, with their siblings, would be considered, less than
generous, compared to those that receive it after their parents death, and being the one handling their money, I am quite aware that a good portion must go towards their care from here on end.

    Bookmark   March 5, 2007 at 5:52PM
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I think everyone on this forum knows that parents have their own minds and you can't make them do anything they don't agree to -- whether it's regarding finances, health issues, safety issues, etc. But advance preparation on your part is important. Finding a qualified elder care attorney and estate planner that you trust is a good idea even if your parents aren't at the point where they would actually want to meet with them. You could get information, advice, and build up a relationship before the inevitable crisis occurs. And, yes, trusts aren't for everyone. But, on the other hand, perhaps they're worth a second look.

In the meantime, all you can do is accede to their wishes.

    Bookmark   March 5, 2007 at 11:25PM
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mangoprincess, My post was directed at some of the other posters advice not you. I know the situation you are in is very difficult. I do wish you my best dealing with this.

    Bookmark   March 6, 2007 at 7:13PM
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Earn. what you seem to misunderstand is that establishing a trust allows the child/trustee to ensure the assets are directed to the necessary care of the parent, AS PER THEIR WISHES.

A Trust is simply a legal TOOL that facilitates the maintenance of the elderly person in question as their circumstances change.

    Bookmark   March 15, 2007 at 6:31PM
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Wow, Im flattered that some have found my postings useful.

Please note this will be kinda long, my apologies in advance. I think for the OP, this comes down to: wills and powers of attorney can indeed work for you and your parents, because they do give you a bit more flexibility over a Trust - at the increase of some time/hassle/expense. If you can deal with this, itÂll be fine.

Setting up a trust does not always have to do with the size of the estate. For instance, we have set up a trust, because we don't have children and have selected two people who are less related to us than some others are, to be our heirs.

Could we do this with wills? Absolutely.

Would the estate, once both of us die, get settled as fast and as cheaply, if we did wills instead of a trust? Nope.

Does the trust REDUCE the flexibility for the Survivor, once one of the original Trustors dies? Yes!

It is absolutely an excellent idea for your parents to sell the house to pay for retirement expenses. We had to practically browbeat my widowed MIL to recognize reality and do the same thing. Medicare doesn't pay for LTC except in limited circumstances and for limited time (100 days). Medicaid is what 80% of the residents in nursing homes use, but you must spend down the assets, and the "lookback" period has increased dramatically, I believe.

What many people don't realize -- we didn't until we actually had to deal with the death of my MIL's husband and then with the house sale four years later -- is that there are some very real disadvantages to Revocable Trusts. A poorly written trust, IMHO, is worse than useless; it is a waste of money. Each RT should be an individually crafted document to suit not only your aims and assets and tax situation, but also your family situation.

So obviously, this is a LIVING document. As your life and the lives of those named in your estate plans change, the legal documents should be kept updated! Unfortunately too many people do what my in laws did - set up a document without much knowledge about what they were doing, and then never looked at it again.

So 25 yrs later when my husband's stepfather died, his portion of the estate became IRREVOCABLE. Unfortunately since they had not updated the contingent trustees or beneficiaries those lists were woefully out of date (and the others are right that anyone can be named a trustee. You could name me, a perfect stranger, but please don't: I would be happy if I never settled another estate again in my life!). It took some expensive legal review before we were able to craft a strategy to update those lists without a lot of trouble, time, and mandatory court appearance.

Trustees do not get paid, BTW, unless the trust provisions provide for it. The only time they are paid is if there are no successor trustees available (everybody named has resigned, is incapacitated, or dead) so the courts must appoint a professional trustee. Executors of wills get paid a flat fee determined by your state laws, no exceptions.

Many people do not realize that in a community property state like California, if you are not careful in the language used in a couple's Revocable Trust, when one of the original Trustors dies, the survivor is NOT always guaranteed full use of the now-Irrevocable portion of the estate!

It is, in fact, quite common for trust language to state that the surviving Trustor is only entitled to the interest earned off the principal amount; or, interest plus reimbursement for health, education and maintenance, as long as principal is NOT invaded. I imagine this is because for so long, trusts were used almost exclusively by wealthy people to pass along assets to not only their children, but their grandchildren, etc.

However, for most middle-class people, they would assume (at least, we did, but we were wrong!) that when one Trustor dies, the surviving Trustor is allowed full use of the "entire pot". But as it turns out, ONLY if the original trust allows it, is that true.

In fact, my MIL's original trust had some very non-standard language in it, and she IS given the power to invade principal on her deceased husband's Irrevocable trust. The investment management firm we hired to handle her now-sizable amount of cash (from the sale of the house), mentioned just yesterday that they were very surprised that she has this right; they don't often see it in their clients' trusts documents!

Needless to say, when creating our own RT recently, my husband and I included language to give the Survivor Trustor as much legal and financial leeway as possible over both portions.

I would suggest once one of your parents dies, to see if at that point, you could convince the survivor (who MUST be still mentally competent) to create a trust. A trust with only one Trustor is a lot easier to deal with.

Whatever happens, I do urge you to talk to a good estate attorney (expect to pay for the consultation) as well as a tax advisor, so that you have an idea of what the options are for you and your parents, depending on how things turn out. Having the knowledge beforehand is invaluable, rather than rushing around under an emotionally stressful situation, asking for advice and not being able to judge the quality of it, which can be dangerous.

Good luck to you going forward. I hope everything works out for you and your family.

    Bookmark   March 15, 2007 at 9:00PM
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Please seriously consider the advice of those urging you to contact an attorney. It is money WELL SPENT, believe me, compared to what could happen if your parents do not have all their "ducks in order", so to speak. Don't guess, secondguess, or rely on the well-intended advice/opinions of others. You need to know the law and you need to have advice on how to proceed. Elder care attorneys deal with this stuff all the time, and are well-conversant on dealing with reluctant elderly clients.

    Bookmark   April 5, 2007 at 11:01AM
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