As the cost of long-term care continues to increase, many people wonder how they will pay for their parents’ or other loved ones’ extended stay in a nursing home.
What may work here is selling your parents house and using that money to finance your elder’s long-term care.
Rather than leaving this decision until a health crisis hits and the family is under pressure to sell quickly, it makes sense to plan. There are several factors to consider when making this decision. Some of them are as follows.
The Amount of Equity in the Home
You must check the equity held by the home and whether it will qualify for a reverse mortgage. In many cases, the home’s equity can be used to pay for long-term care without selling the property.
A reverse mortgage allows people 60 or older to borrow against the value of their homes, deferring payment until they die, move out or sell.
There are conditions around provided that don’t mean you should not get a forward.
The Financial Situation of the Other Family Members
If everyone is working and has substantial assets, it makes sense not to use a parent’s home equity.
If one spouse can support the entire family on their income while the other takes care of their parents, this is also a question that doesn’t need answering.
The Incurrence of Large Medical Bills
Once someone has become eligible for Medicaid, they have few options. Even if the spouse remains at home to care for the ill partner, public benefits will pay the bills and not out of pocket.
The decision is better made before using these services and before certain assets are depleted and unavailable for funding this eventuality.
If the family is expecting large medical bills, selling the home might make sense and using the proceeds to pay for care.
The Availability of Long-Term Care Insurance
According to Statista, older millennials constituted 23 percent of all homebuyers in 2020 in the US.
Some people might choose to sell their parents’ homes to purchase long-term care insurance.
This type of insurance can help pay for the cost of care if someone becomes ineligible for Medicaid.
Of course, long-term care insurance is expensive, and coverage has many limitations.
People who are not current on their premium payments might need to wait for a grace period before their policy becomes effective. If they have pre-existing conditions, the local law might deny the coverage at the outset.
The coverage varies from state to state and might not be available in certain parts of the country.
Lack of Other Options
Often, when you consider selling your parent’s house, it means there are no other alternatives to finance care costs. In most situations, this is because they have already tapped into their retirement savings, used up their life insurance, and exhausted any other resources they might have.
It is essential to consult with an elder law attorney in your locality. They will give you a complete understanding of all the financial implications of selling a home to pay for long-term care.
Families need to be prepared to ensure that their loved ones will have the best possible quality of life, no matter their age.