| As Father Time marches on, the question of | | | | senior and the child) for one of the children to |
| what to do with the home becomes a greater | | | | move in and serve as a caretaker, cook, |
| concern. In some cases, ruminating on the | | | | lawn-cutter and/or pool boy/girl. |
| alternatives can dominate one's thinking. If a | | | | There are several ways to get the equity out of |
| person is aware of the various options and | | | | the home, while continuing to live in the home. |
| chooses a path that makes the most sense, | | | | First, the home could be re-financed. Mortgage |
| peace of mind can often be the result. | | | | interest rates today are low. Properly invested, |
| Studies have shown that 90% of married couples | | | | the funds released could cover the new mortgage |
| and 62% of single persons reach retirement | | | | payments. If not, the difference could be less |
| owning their own homes. Coupled with | | | | expensive than rent. Depending on the person's |
| non-monetary considerations of whether to stay | | | | age, putting a part of the proceeds into an |
| or sell, one major objective is how to convert the | | | | immediate annuity may even cover the mortgage |
| equity in the home to an income. | | | | payment and then some. |
| In some cases, selling the home is the most | | | | If the person has a retirement plan that |
| attractive option. However, remaining in the home | | | | mandates required minimum distributions starting |
| could be simpler and less stressful. Many people | | | | at age 70 1/2, the interest deduction on the new |
| are too quick to jump to the "sell" option because | | | | mortgage could be a welcome offset to the |
| they are not aware of all the options that would | | | | RMDs, which must be included in taxable income. |
| allow staying in the home and extracting the | | | | For large estates subject to estate taxes, placing |
| equity as well. | | | | the home in a Qualified Personal Residence Trust |
| Weigh each of the following options against selling | | | | (QPRT) can potentially remove the home, and |
| before throwing in the mental towel and listing the | | | | any appreciation from the date of the transfer |
| home. | | | | into the trust, from the taxable estate. Proper |
| An AARP study done in 2000 showed that more | | | | trust drafting can also provide for the housing |
| than 90% of seniors wanted to stay in their | | | | needs of the survivor of a married couple and, |
| homes for as long as possible. Almost 82% still | | | | ultimately, leave the home to the children. |
| wanted to stay even if they needed care. | | | | Selling the home to the children is another option. |
| That is a very loud vote. Therefore, I would | | | | By structuring the sale and lease back according |
| recommend looking at long term care insurance | | | | to the rules, the $250,000 single person or |
| that either only provides home care or a more | | | | $500,000 married couple capital gains tax |
| comprehensive plan that includes home care. Many | | | | exclusion could apply. Here, again, the parents |
| seniors balk at the topic of long term care | | | | would continue to live in the home and pay rent |
| because they figure they will never go to the | | | | to the children. This removes the home from the |
| "home." Statistically, 50% of them are right. What | | | | taxable estate as well. |
| many fail to realize is that at some point almost | | | | A gift-leaseback is an alternative. The value of the |
| everyone will need some kind of help. Home care | | | | home will use up part (or all) of the lifetime unified |
| benefits may provide the needed assistance while | | | | credit. Consult a tax attorney if the value of the |
| allowing the person to remain in their home. | | | | home is large and this option is one of the ones |
| As seniors age, the upkeep of the home may | | | | on the table. |
| become overbearing. The lawn still needs cutting, | | | | If the homeowner(s) are age 62 or older, a |
| the bushes trimmed and the flower beds kept | | | | reverse mortgage may be a viable option. The |
| free of weeds. The inside needs dusting; the | | | | National Council on Aging calculates there are 13.2 |
| carpet needs vacuuming and the windows need | | | | million seniors who could qualify for a reverse |
| washing. Eventually, in many people's minds, these | | | | mortgage of $20,000 or more. The average |
| become reasons to sell. | | | | would be $72,000. |
| I would invite you to put a pencil to this. Look at | | | | Reverse mortgages can reduce or eliminate the |
| hiring someone to come in and clean. Hire a lawn | | | | children's inheritance. Today, there are Federal |
| maintenance company or the teen-ager down the | | | | Rules for reverse mortgages and about 90% are |
| street trying to pay for his car. Having these | | | | federally insured. Fees can be high and will differ |
| things taken care of in this manner is a lot less | | | | among lenders. Shop around. |
| expensive than moving to a retirement home. | | | | Prior to making the decision to stay in the home |
| If the home is too big, close some rooms off. If it | | | | or sell, each of these options should be part of |
| cost too much to heat or cool, seal the vents in | | | | the discussion among the senior, their children and |
| un-used rooms. | | | | financial advisors. |
| Sometimes it may make sense (both for the | | | | |