Where Do I Start? (Part 2)
(Eating an Elephant One Bite at a Time - Part 2)
Moving in with your children? Downsizing? Assisted Living? Senior housing? If you answered yes to any of these - willingly or not - you likely have a home to sell. Part 1 of the Elephant Guide acknowledged the enormity of such a task, especially if you’ve lived a lifetime in this home. It’s filled with memories and comfortably arranged just how you like it. Part 1 offered some questions to help you (and possibly your children) make the moving decision, and also outlined important next-steps, none of which begin with packing. Your move starts with a plan, and the plan starts with information from a variety of professionals.
First, you can’t really sell your home unless you know where you might move to, and you can’t really know where you might move to unless you know how much money you’ll have to spend. Unless you’re a retired financial planner, your money management skills probably end with a basic accounting of your home/family finances. Statistically, it’s not uncommon for senior women to have never handled their own finances. For the purpose of determining what kind of future housing you’ll be able to afford, and how to afford it, it’s important to consult with a financial planner first.
A financial planner (FP) is not the same thing as an accountant. In the purest form of definition, financial planners manage your money. They address issues related to investing, moving, and budgeting finances. They can review your overall financial picture and help devise a plan that will maximize your assets. Accountants, on the other hand, keep track of money and file your annual taxes. They can work with your FP in determining an overall plan for your financial future. It’s never too late to start planning how to finance your next move and keep as much money for yourself as possible. Most (good) FPs and accountants will meet with you at your own home, with their portable technology. Their smart-phones and laptop computers will do the work right in front of you! After meeting with both of these professionals, you should have a pretty clear picture of what you can afford for your next move, and how you’ll pay for it.
Once you have a clearer understanding of your current and projected financial picture, you’ll want to know how to “shelter” or “protect your assets” wherever possible, and plan for their ultimate disposition. If you limit yourself to selling your current home and anticipate using the proceeds to pay for your next housing option, you may run out of money before you’re done needing it. Medicare does not pay for custodial or long-term care in assisted living facilities. These costs are usually out-of-pocket (although long-term care insurance may cover a nursing home). When these funds are exhausted, you may need to turn to Medicaid (a public assistance program), but you’ll have to qualify for it first. The basic eligibility rule says an individual cannot have more than $2,000 in liquid assets to qualify ($3,000 for a couple).
There are multiple legal and ethical ways to “spend down” your liquid assets, much of which has to do with the equity in your home. Unfortunately, there is also a five year “look back” period for eligibility. (Please see The Details for additional info on home equity and qualifying for Medicaid). Although your financial planner and accountant may know some of the basics about Medicaid, it’s important to speak with an attorney who specializes in estate planning, elder law and/or Medicaid law. Most attorneys who specialize in one of these areas can also help you with the others. They may recommend you create a trust to help transfer (and thereby protect) your assets in anticipation of death. Although trusts can be complicated, a good estate planning or elder law attorney should be able to clarify it for you.
The important thing to understand is that you should think about consulting with a financial planner, an accountant, and a specialized attorney before you decide what your next steps will be. Your initial consultation with these professionals should be free, but make sure to ask when you make your initial call. After meeting with these folks, you should have a good idea of how much money you will have to pay for your forever-home!
For more information about The Elephant Guide, please visit my real estate site at Marbleheadhomes.net.