Selling Elderly Parents Home: How To Do It + Mistakes To Avoid
Selling a home on behalf of an incapacitated or aging parent is a challenging task that demands more than your average home sale due to the legal hurdles and heightened emotions that can contribute to potential complications.
Whether you're looking to transition your parent into assisted living, move them in with you, or address the financial burden of long-term care, the responsibility of selling your elderly parent’s home falls on you.
This process can be overwhelming, especially if it arises unexpectedly. As the costs of assisted living and long-term care continue to rise, many families find themselves grappling with this situation.
Getting the legal authority to sell your parent's home is crucial to prevent any legal disputes or challenges down the road and ensure a smooth and successful sale process.
Accurately valuing and selling your parent's home at a fair market value is essential to avoid any legal or financial liability.
Before making any decisions, consider the unforeseen financial consequences of selling your parent's home, including tax implications and eligibility for government benefits.
How to Get the Legal Authority to Sell Your Parent's Home
One of the most important steps in the process of selling your parent's home is establishing proper authority to sell the property.
As a family member or caregiver, you may not automatically have the right to sell the home, even if you have been given the responsibility to handle the sale because you are not the legal owner of the property.
Property ownership is typically determined by the title or deed, a legal document that establishes ownership rights.
To sell the property, you need to establish your authority to act on behalf of the legal owner through a power of attorney (POA) or a court order, like a conservatorship, which grants you the legal authority to handle the sale on behalf of your parent.
If your parent is mentally competent and willing to grant you authority to sell the property, they can sign a power of attorney document.
A POA document grants you the legal authority to act on your parent's behalf when selling the property. The power of attorney document must be signed in the presence of a notary public and witnesses to make it legally valid.
If your parent is not mentally competent or willing to grant you authority to sell the property, you may need a court order, like a conservatorship. To get a court order, you'll have to go to court and have a judge appoint you as the conservator or guardian of your parent's estate.
Without such legal authority, any sale you make could be considered invalid or challenged, which can lead to legal disputes and financial losses.
Don't make the mistake of assuming that being a guardian or conservator automatically gives you the authority to sell a property owned by a ward, such as your parent.
Seek legal counsel to determine if you have the necessary authority to sell the property.
Even assuming you have legal authority, you may still be required to provide a power of attorney document, court order, trust document, property deed, or death certificate to lenders and title companies to support your claim.
Establishing proper legal authority before attempting to sell your parent's home will help prevent any legal disputes or challenges down the road and ensure a smooth and successful sale process.
How to Accurately Value Your Parent's Home Before Selling
If you're selling your parent's home, get an accurate assessment of its value before putting it on the market.
As a fiduciary (someone who has been granted the legal authority to act on your parent's behalf), it's your responsibility to act in your parent's best interest when handling their financial affairs.
Selling the property at a fair market value is a legal requirement to avoid any legal or financial liability. Failure to do so may leave you accountable for any losses your parent may incur as a result of the sale.
Work with a Real Estate Agent
Even if you plan to sell the property to a family member, you should work with a real estate agent. They can provide an unbiased estimate of the property's value based on the current market conditions.
Real estate agents have access to the Multiple Listing Service (MLS) database, which helps them analyze market trends and identify comparable properties that have recently sold.
Working with a real estate agent can also help you ensure that the sale process is done correctly.
They can help you prepare the property for sale with a professional appraiser and home inspector, handle negotiations, and ensure all legal requirements are met during the transaction.
If you don't need the home listed, you could negotiate the commission rate with the agent.
Many real estate agents are willing to handle the process for a 3% listing commission as opposed to a 6% commission. Reducing the commission rate can significantly reduce the cost of selling the property, resulting in savings of thousands of dollars if the property is sold at a lower price.
Getting Your Parent's Home Ready for Sale: Tips for Cleaning and Repairs
It's likely that your parent has lived in the house for a long time, and over the years, they've probably accumulated many belongings.
Take the time to sort through furniture, clothes, and other items to get rid of anything unnecessary. You can donate the belongings or host a yard sale.
If you have a strong emotional attachment to the items in the house, consider hiring a professional decluttering company.
A professional decluttering company can provide an objective perspective when it comes to deciding which items to keep and which to let go of. They can also handle the physical work of removing unwanted items from the house.
Consider Making Repairs or Renovations
A house needs consistent upkeep to remain in good condition. Repairs and renovations can sometimes go neglected if an elderly person has lived in the house for a long time.
Before putting the house on the market, survey what renovations need to be made and whether carrying out those repairs is worth the time and effort.
Cosmetic updates can make a significant impact when it comes to selling a home, including curb appeal, which is the first impression a potential buyer will have when looking at the property.
If you're unsure about what repairs or renovations need to be made, consider hiring a professional to assess the home. A home inspector or contractor can provide an unbiased opinion on what work needs to be done and can help you prioritize repairs based on their importance.
Budget wisely when making repairs or renovations, however. Work with your real estate agent to determine which renovations will provide the most return on investment when selling the property.
Some renovations, such as updating the kitchen or bathrooms, can significantly increase the home's value and appeal to potential buyers, while other less expensive updates might provide a better return on investment.
How to Deal with Family Dynamics When Selling Your Parent's Home
Selling your parent's home is a challenging and emotional process, and it can bring out the worst in family dynamics.
Here are some tips for dealing with family drama when selling your parent's home:
Losing a parent is a significant loss, and it's important to acknowledge the grief and emotions that come with it.
Some family members may be consumed by grief and unable to make decisions, while others may not want to sell the home. Everyone processes grief differently, and taking time to work through those emotions is okay.
Communication is key when dealing with family dynamics.
Try to have open and honest conversations about the process and everyone's expectations.
Listen to each other's concerns and try to find common ground. Consider the help of a mediator to facilitate these conversations and negotiate any disputes that arise.
Have an Estate Lawyer Present
You may want to hire an estate lawyer during the selling process to ensure that costly mistakes aren't made.
An estate lawyer can help with the legal transfer of the property from your parent's name to your name or to any other named beneficiaries in your parent's will. This will ensure that the transfer of ownership is done legally and correctly.
Selling a property can also have tax implications, such as capital gains taxes, transfer taxes, or inheritance taxes. An estate lawyer can advise you on any tax implications related to the sale and help you stay up-to-date on your tax obligations.
Seek Professional Help
If family dynamics become too challenging to handle on your own, consider seeking professional help.
A therapist or counselor can provide emotional support and help family members work through any unresolved issues related to the sale of the home.
Related: Estate Planning: A Comprehensive Guide
Securing Your Parent's Property
During the process of selling the house, securing the property is crucial.
Changing the locks on the property protects it from unwanted intruders.
Unfortunately, there are cases where people who believe they have a claim to the home may try to move in and occupy the property, making it difficult to remove them. Securing the property can prevent unauthorized access and protect the home from damage or theft.
Changing the locks and securing the property are also important to maintain insurance coverage.
If someone moves in without consent and causes damage to the property, the insurance coverage on the home may be affected. If someone who is not authorized to live on the property causes damage, the insurance provider may argue that the damage is not covered under the policy.
This can result in voided coverage, leaving you or your parents to pay for the damages out of pocket. By securing the property, you can ensure that the property is covered by insurance.
Finally, securing the property can give you peace of mind during a difficult and emotional time. It can give you the assurance that the property is protected and that no one can access it without your or your parent's consent.
The Financial Implications of Selling Your Parent’s Home to Pay for Senior Care
Selling a parent’s home to pay for long-term care is a popular option, but it can come with unforeseen financial consequences.
Before you sell, you need to understand how it will affect your parent’s tax situation and eligibility for government benefits.
If your parent is relying on Medicaid to pay for long-term care, you need to understand how a home sale will affect their eligibility.
Medicaid looks at an applicant’s income and assets to determine eligibility. If your parent has a lot of equity in their home, it may disqualify them from receiving Medicaid benefits to cover nursing home care.
Most states have a home equity limit from $636,000 to $955,000. A modest home in an area with low costs of living may not surpass this limit, but if your parent lives in a state with high costs of living, they may have more equity than allowed by Medicaid.
Home Sales and the Medicaid Look-Back Period
Selling a parent’s home to pay for senior care can also affect their Medicaid eligibility due to the program’s look-back period.
This is a period of time when Medicaid assesses whether your parent sold the home for less than fair market value to get around the resource limits.
If your parent sold the home for less than the fair market value during the look-back period, Medicaid would assess a penalty that can affect their eligibility.
Selling a parent’s home to pay for senior care can also have tax implications.
The IRS defines a capital gain as the difference between the sale price of an asset and the adjusted basis of the asset. If your parent has owned their home for more than a year and realizes a capital gain when the sale closes, they may owe long-term capital gains tax.
In addition to federal taxes, your parent may also owe state taxes after selling a home. Each state has its own rules for taxing capital gains, so consult a tax advisor to find out how a home sale will affect your parent’s tax situation.
If your parent is a veteran, they may qualify for pension benefits through the Department of Veterans Affairs.
However, selling their home could affect their eligibility for these benefits. The cash they receive from the sale is considered an asset that’s included in the net worth calculation.
They may lose their pension benefits if the sale puts them over the financial resource limit.
How Can Trustworthy Help?
Trustworthy is a digital safe deposit box that can help keep important documents safe during the sale of an elderly parent's home.
Trustworthy provides a secure platform for storing and sharing sensitive documents such as wills, power of attorney, and other legal documents.
By using Trustworthy, family members and caregivers can ensure that all necessary documents related to the sale of the home are securely stored and easily accessible when needed.
This can help prevent the loss or misplacement of important documents, which could cause delays or legal issues during the selling process.
Trustworthy also provides features like automatic backup and multi-factor authentication, ensuring the documents are secure and easily accessible only to authorized parties.
Sign up for Trustworthy today to get peace of mind during the stressful and emotional process of selling an elderly parent's home.