A senior’s home can be used in a variety of ways, whether they decide to enter senior living accommodations or age in place. As the senior consults their adult children on how to distribute their assets, including their home, the topic of signing over the home will arise.
What are the senior’s two options?
The older adult may keep their home, which means they must be able to afford the upkeep, taxes, and mortgage. They might use it as a vacation home or pass it down as an inheritance. Renting out the home is a practical option for earning rental income.
If the senior moves into assisted living, they may decide to sell the home to pay the costs involved in receiving elder care. In the event the older adult keeps the home, the onus falls on the shoulders of family members to decide what to do upon inheriting it.
Why should families discuss signing over the home?
Adult children should remember that the final decision to sell or keep the home belongs to their elderly parent. They retain full legal authority to decide what to do with their property. This is the case unless the adult child has gained power of attorney or has inherited the home. But many seniors discuss their financial plans with their adult children. The topic of what to do with their home is a common issue. Both the senior and adult children should review the former’s finances to determine if they can afford elder care without selling the home.
Elder care is pricey, with monthly costs averaging nearly $5,000. Funding such a major, ongoing expense is financially unfeasible for most seniors. Since their home is their largest asset, selling it is a realistic option to help them pay for long-term care. Alternately, paying for assisted living can be achieved without selling the home. Seniors who take out a reverse mortgage gain the equity to offset the costs of elder care. Keeping the home is especially desirable for seniors who wish to keep the property in the family.
What is involved in keeping the home?
1. Estate Taxes
If the senior decides to keep the home and pass it down as an inheritance, family members should consider the implications involved with ownership. Families must be able to afford the estate or inheritance taxes if their state has an estate tax.
2. Cost of Repairs
The home may be older, suggesting a high cost of maintenance. Upkeep and repairs can cost upwards of $6,000 per year. Family members who decide to reside in the house may have plans to remodel it, which comes with additional expenses.
3. Insurance Premiums
The cost of insuring the home is another important financial consideration. Homes in Florida, for instance, are expensive to insure. Premiums spike due to the ongoing threats of natural disasters, such as hurricanes. Homes in areas prone to natural calamities are more costly to insure.
4. Rental Income
Families might have plans to turn their elderly parent’s home into a rental property. This is an excellent option if the rental income exceeds the cost of upkeeping the home. Before going down this route, be aware of upfront costs, long-term costs, and strategies of managing a rental property.
What are reasons to sign over the home?
1. Avoid Capital Gains Tax
Seniors may wish to sign over their home to the family to avoid taxation. A home the senior purchased two decades ago for $25,000 may be worth half a million dollars today. The home’s increased market value involves a hefty tax bill to the family when the senior gifts it.
2. Dodge Probate
Seniors might wish to avoid probate and immediately decide to transfer their home to the family. While probate is time-consuming and costly, this is the case in only a few states, like California and Florida. Probate is a simple process in most states, especially when smaller estates are involved.
3. Medicaid Eligibility
Seniors may wish to sign over their home to help them qualify for Medicaid. Eligibility for the federal program is determinant upon the senior’s assets. By transferring ownership, older adults assume they may qualify for Medicaid. But this is only partially true.
Situations may occur where the senior’s home is not deemed an asset for Medicaid consideration. In fact, transferring the home may introduce negative consequences regarding eligibility. Plus, Medicaid benefits can be delayed due to the program’s five-year lookback period, which is applied to uncompensated transfers.
Upon deciding to sign over the house, seniors can do so in several ways, the most common of which is with deeds. Three deed options are available: quitclaim deed, gift deed, and transfer on death deed. Any type of deed requires the services of a qualified legal professional.
Signing over a home is a major life decision, one that requires careful deliberation about tax implications, Medicaid eligibility, and probate procedures. Families should discuss finances with their elderly loved one to ensure they arrive at the best decision for everyone.
Families are also encouraged to hold conversations about elder care. Assisting Hands Home Care is a reputable elder care service that is useful when the senior keeps their home. We make aging in place a reality for older adults who wish to live in the comfort and familiarity of home.
Professional caregivers are tasked with numerous non-medical care tasks that allow seniors to be independent. Our responsibilities include healthy meal preparation, grocery shopping, transportation, light housekeeping, and medication reminders. We assist seniors with personal hygiene tasks, like bathing and grooming. Senior companion care is a highly valued component of our in-home services. Caregivers engage in pleasant conversations with seniors, take them on outings, play stimulating games, and join them in enjoyable leisure activities. Our companionship prevents loneliness and social isolation.
When your aging loved one chooses to keep their home, consult Assisting Hands Home Care for dependable senior home care. Our professionals serve the elderly population in the Batavia, Aurora, St Charles, Bartlett, IL, and the surrounding areas. Schedule a consultation today at (630) 948-8193 and learn more about quality home care.
