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