What happens to my house if I go into assisted living?

With the median monthly cost for an assisted living facility hovering around $4,700, according to a recent Genworth survey, understanding how to finance this care is crucial.

For many seniors, the question of "What happens to my house if I go into assisted living?" is a central piece of this financial puzzle and a key part of their long-term planning.

Quick Summary

Deciding what to do with your home involves weighing options like selling to fund care, renting it for a passive income stream, or keeping it unoccupied, each with its own financial and legal implications. The best choice depends on your financial situation, family needs, and eligibility for programs like Medicaid, which can affect your home's status.

Key Points

• Three Main Options: Your primary choices are to sell your house, rent it out, or keep it vacant, each with distinct financial and emotional consequences.

• Funding Source: Selling provides a large lump sum for immediate care costs, while renting creates a steady, ongoing income stream.

• Medicaid Impact: How you handle your home and its proceeds can significantly impact your eligibility for Medicaid, particularly concerning asset limits and the estate recovery program.

• Potential Risks: Keeping a home vacant poses financial risks from ongoing costs, property neglect, and potential insurance issues.

• Seek Professional Help: It is highly advisable to consult with an elder law attorney and a financial planner to navigate the legal and financial complexities involved.

• Early Planning is Key: Making decisions about your home and finances long before needing assisted living can help protect your assets and simplify the transition.

Your Home and Assisted Living: Exploring Your Options

Moving into an assisted living community is a significant life transition, and one of the most pressing questions for many seniors is what to do with their home. There is no single answer, as the right path depends on your financial needs, family situation, and health. The primary options include selling, renting, keeping it vacant, or transferring ownership.

Option 1: Sell Your Home

Selling your house is often the most direct way to fund your assisted living expenses. It can provide a substantial lump sum of cash, which can cover your care costs for an extended period. This option also removes the burdens of property taxes, insurance premiums, maintenance, and utility bills associated with the home.

Pros of Selling

• Financial Liquidity: Provides a large sum of money to pay for assisted living without additional loans or financing.
• Eliminates Responsibility: Transfers all ownership responsibilities, including upkeep and costs, to the new owner.
• Simplified Finances: Reduces monthly financial obligations and simplifies estate administration.

Cons of Selling

• Emotional Attachment: Can be emotionally difficult to part with a long-held family home.
• Medicaid Implications: If you require Medicaid in the future, the proceeds from the sale of your home could count as an asset, which might affect your eligibility during the "look-back" period.
• Market Risk: The timing of the sale is dependent on market conditions and the sale price can fluctuate.

Option 2: Rent Out Your Home

For those who wish to retain ownership, renting out the property can create a reliable income stream to help offset the costs of assisted living. This path allows you to retain the property as a valuable asset while generating monthly cash flow.

Pros of Renting

• Continued Ownership: You and your family retain ownership of the property.
• Passive Income: Rental income can provide a steady source of funding for your care.
• Appreciation Potential: You can benefit from any future appreciation in the home's value.

Cons of Renting

• Landlord Responsibilities: You or a family member must manage tenants, handle maintenance and repairs, and deal with vacancies.
• Medicaid Income: Rental income is counted as income by Medicaid, which can impact your eligibility for benefits.
• Management Costs: Hiring a professional property manager can significantly reduce your rental income.

Option 3: Keep the Home Unoccupied

In some cases, especially for short-term stays in assisted living or when a family member is expected to eventually move in, leaving the home vacant may seem like a viable option. However, this is often the riskiest and most costly choice.

Risks of Keeping a Vacant Home

• Increased Costs: You remain responsible for all costs, including mortgage, taxes, insurance, and utilities, in addition to assisted living fees.
• Vandalism and Theft: Vacant homes are more susceptible to crime.
• Insurance Issues: Homeowner's insurance may not cover damages that occur to an unoccupied property.
• Maintenance Needs: Without regular upkeep, the property can fall into disrepair, lowering its value.

Medicaid, Estate Recovery, and Your House

Medicaid is a state and federal program that helps with healthcare costs for people with limited income and resources. It is crucial to understand its rules regarding your home.

For Medicaid eligibility, your primary residence is typically not considered a countable asset, up to a certain equity limit (which varies by state), as long as you intend to return or a spouse or other dependent relative resides there. However, this changes after your death due to the Medicaid Estate Recovery Program (MERP).

MERP allows the state to recover money spent on your long-term care from your estate after you pass away. In most cases, your home is the only significant asset left in your estate, making it a target for recovery. An irrevocable trust is one advanced planning tool that can potentially protect the home from Medicaid recovery, but this must be done well in advance, often years before applying for benefits. You should consult an elder law attorney before taking this or any other action.

It is important to understand the complexities involved. For more information, you can research resources from sources like ElderLawAnswers, which provides valuable information on how to protect your house when considering Medicaid eligibility.

Selling vs. Renting vs. Keeping Your Home: A Comparison

Feature	Selling	Renting	Keeping Unoccupied
Funding Source	Large lump sum cash from sale proceeds.	Steady monthly income stream from rent.	No additional funding source; may deplete savings.
Ongoing Responsibility	None (after the sale is complete).	Significant (landlord duties, maintenance). Can be delegated to a property manager.	Full responsibility (maintenance, utilities, taxes).
Medicaid Impact	Proceeds are counted as assets, impacting eligibility during the look-back period.	Rental income is counted, potentially affecting eligibility.	Not counted as an asset while occupied by a dependent or with intent to return, but susceptible to estate recovery.
Asset Protection	No long-term asset protection.	Retains the asset, but Medicaid can place a lien on it for estate recovery.	Vulnerable to Medicaid Estate Recovery after death.
Financial Risk	Market-dependent sale price.	Tenant issues, vacancies, maintenance costs.	Vandalism, neglect, loss of insurance coverage.
Emotional Factor	Can be difficult to give up.	Allows for continued family legacy.	Allows for continued attachment and potential future return.

The Importance of Professional Guidance

Navigating these complex financial and legal issues requires expert advice. Consulting with a qualified elder law attorney and a financial planner is highly recommended. These professionals can assess your specific situation, including your assets, income, family needs, and state laws, to help you develop a strategy that protects your interests and financial well-being. They can also help with estate planning documents, such as trusts, which can be critical for protecting your home.

Making the Best Decision for Your Future

Deciding what happens to your house if you go into assisted living is a deeply personal and financial decision. Carefully evaluate the pros and cons of each option—selling, renting, or keeping it—in the context of your personal finances and your long-term care needs. Consider the role of Medicaid and estate recovery, and always seek professional legal and financial guidance to make an informed choice that provides peace of mind and financial security for your future.

Note: It's best to start planning for these scenarios well in advance, as certain actions, like transferring assets, can have a look-back period that impacts Medicaid eligibility.

Frequently Asked Questions

Will the assisted living facility or government take my house?

No, neither the assisted living facility nor the government will seize your home while you are living. However, if you rely on Medicaid for long-term care, the state can seek reimbursement from your estate after you pass away through the Medicaid Estate Recovery Program (MERP), which could potentially require the sale of your home.

What is the Medicaid 'look-back' period?

The Medicaid look-back period is a specific time frame, typically 60 months (5 years), during which Medicaid reviews your financial transactions, including the sale or transfer of assets like your home. If you sold or gave away your house for less than fair market value during this period, it could result in a penalty period of ineligibility for Medicaid benefits.

Can I give my house to my children before moving to assisted living?

While it is possible to transfer your home to your children, doing so can trigger the Medicaid look-back period. If you apply for Medicaid within this period, the transfer could make you ineligible for benefits for a length of time proportional to the value of the home. It is best to consult an elder law attorney to understand the specific rules and potential penalties.

Is it better to sell or rent my home to pay for assisted living?

This depends on your financial situation and goals. Selling provides a large, immediate cash infusion and removes all ownership responsibilities. Renting generates ongoing income but involves landlord duties and can complicate Medicaid eligibility. Consider your cash needs, comfort with being a landlord, and long-term estate plans.

What if my spouse still lives in the house?

If your spouse continues to live in the home, it is generally considered an exempt asset by Medicaid and is not counted against your asset limit. This is part of spousal impoverishment protection laws designed to prevent the spouse still living in the community from losing their home.

How can an irrevocable trust protect my house?

An irrevocable trust is a legal tool that transfers ownership of your home to the trust. Because you no longer own the asset, it cannot be considered part of your estate and is thus protected from Medicaid Estate Recovery. This must be done well in advance of applying for Medicaid to avoid the look-back period, and should only be established with the help of an experienced elder law attorney.

Should I consult an elder law attorney?

Yes, consulting an elder law attorney is strongly recommended. They specialize in the complex laws surrounding aging, long-term care, and estate planning. An attorney can provide personalized advice on how to legally and financially protect your assets, including your home, based on your specific circumstances and state regulations.