Selling a Parent’s Empty Home
This is the conclusion of a three-part series which addresses various considerations related to the family home and planning for, or reacting to, a long-term care crisis. The first week’s article can be found here: https://keystoneelderlaw.com/the-family-home-part-i-of-3/ and last week’s article can be found here: https://keystoneelderlaw.com/the-family-home-part-2-of-3/ Those articles addressed various issues to consider when evaluating the importance of the family home and options for when the parents want multiple children to benefit from the family home.
This week’s article will explain why the best option for the family home is usually to sell it soon after it has become empty because the parent is receiving long-term care in a skilled nursing home. This is especially true when the children have their own homes and do not live locally.
The risk caused by an empty home is a reason why insurance companies charge more when a home has become vacant. Failure of a family to report that change in status could cause denial of a claim.
It can be difficult emotionally to sell the family home while the parent is still alive in a nursing home. One reason can be because the parent is hanging on to hope that they can return home, if only to spend their final few days there while they die. Avoidance of the chore of sorting through accumulated property can be another obstacle.
It is almost never practical for a parent to return home to die, especially if children are either living out of town, or busy with their own jobs and families in the local area. Hospice services can be provided in a nursing home. In normal times when pandemic restrictions are not in effect, children may have extended visitation privileges at the nursing home to remain with the parent during the final days and hours.
It can be hard for an adult child to understand that, when a parent with dementia expresses a desire to “go home,” the parent might not be imagining the most recent home but instead the parent’s childhood home. Failure to understand this, and to instead hang on to the home out of guilt or false hope, is unfortunate and can be expensive.
The best answer to the parent’s question of “when may I go home” usually is “whenever the doctor says it is safe to do.” Even if the adult children know that probably will never occur, there is no need to deny the parent’s false hope. Even if such a home is eventually sold during the parent’s lifetime, it can be done legally by the parent’s agent, often with no benefit to express that reality to the parent.
Sometimes the delayed sale of the family home is caused by procrastination to avoid the task or sorting through all the things that the parent has collected or even hoarded over the years. We work with several sensitive and careful service providers who specialize in this area. Caring Transitions is one example of a national franchise that provides this service in relation to an on-line auction to optimize value from the parent’s personal possessions which the children do not want.
Hiring a professional to help with the disposal of the parents’ unwanted property and prepare the home for sale can keep a child from being overworked. Such expense is offset because selling the home results in saving on utilities and property taxes, eventual costs of probate and the estate recovery actions by the Department of Human Services (DHS).
If the home has been cleaned out and it is in livable condition, there is no economic benefit to rent it since the monthly proceeds from the rent must be reported to DHS and used to pay for nursing care.
Even if a family member wants to buy the home, such a transaction must be at fair market value. There are legal strategies which may be used to help a somewhat marginally qualified family member to get the house with creative financing, but the mortgage note will become a probable asset that is payable shortly after death of the parent, and will be subject to DHS estate recovery.
It is most profitable to sell the family home before the parent completely runs out of other funds and needs to have the cost of care subsidized by DHS with Medicaid (a.k.a. Medical Assistance or MA). In such an event, through use of a gift-annuity strategy, it is possible to save as much as half of the proceeds from the sale of the home as “an advance on inheritance.” If the parent dies before the end of the annuity payments, sometimes the remaining annuity payments can be inherited by the adult children.
If the home remains after the death of a parent who has received MA from DHS, then DHS will make a claim during the time of probate for the amount of money that DHS as spent on the parent’s care. But if the home is sold while the parent is living, then normally there is no probate or estate administration and DHS cannot make a claim.
Selling a home is a complicated process. I recommend using a Realtor with substantial residential experience to sell the home. To do otherwise could be pennywise and pound foolish. Even if the family believes that they have found a buyer, there is value in using a Realtor as a transaction specialist to make sure that the deal gets to closing in the most cost-effective manner.
If you have read this three-part series, you know that different situations suggest that different strategies should be applied, depending on needs of family members. There is avoidable risk that is present with any approach. No single strategy is best of all. Knowledgeable advice from an elder law attorney is needed when it is first sensed that this issue could apply to either the parents or their children, either to plan ahead or to react to a long-term care crisis.
Dave Nesbit, Attorney