Following a series of health scares, your parents, both in their early eighties, recently made the decision to move into a local high-end continuing care community. Once their home is sold, the proceeds should be more than enough to cover the six-figure upfront “buy in” cost, but they do not have sufficient liquid and investment assets to cover the payment without affecting their ongoing lifestyle needs. You don’t want your parents to be under tremendous pressure, trying to coordinate the timing of selling the home, paying to get on the waiting list for the new community, all while making myriad decisions about décor, which furnishings to take with them, etc., especially since neither is in perfect health.
You agree that a continuing care-type retirement community is your parents’ best choice. They will start out with independent living, continuing to see their regular doctors, then later, if needed, be able to transition to assisted living without worrying about a big increase in the monthly fee.
To ease the pressure on them, you plan to pull money out of your own investments to finance the fee. At the right time, you will oversee the listing and selling of their home. (As their only living child, you would be the one inheriting the home in any event.). Meanwhile, you’ve scheduled meetings with your own tax advisor and financial planner to discuss which of your own holdings would be best to liquidate without overly severe tax consequences. (Now in your early sixties, you are not worried about early withdrawal penalties from retirement plans, but you are concerned about taxes and even about the possible estate planning ramifications of a six-figure gift to your parents.)
As opposed to liquidating investments in order to finance the community “buy-in” fee for your parents, consider tapping into the equity in your own home in the form of a reverse mortgage, designed for those 62 and better. With no need to make monthly mortgage payments, you can make a lump sum withdrawal from your equity to pay the fee for the continuing care community on behalf of your parents. (Later, after your parent’s home is sold, you might discuss any gift tax or estate planning ramifications with your advisors, who can help determine the best mechanism for using the proceeds to “restore” the equity in yours.
If you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).
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Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.