At Northland Realty, we know that a unique and special segment of our market is working with senior citizens that are considering to sell what is typically their largest investment; their home - one full of family memories and a reflection of life's work and rewards. We believe in honest, straight forward answers, not marketing gimmicks, sales hype, and high pressure tactics typical of some area REALTORS®. We give seniors the highest level of respect, the patience that they need in decision making, and advice they can trust.
Listed below is basic information regarding questions most seniors have:
Understanding Capital Gains and Income Tax ramifications can be a complex issue. Today, the IRS states that you must own and live in the home for a minimum of two years over the past five years prior to a sale, and then the property is exempt from Capital Gains taxes up to a gain of $500,000 for married people filing jointly. Each person’s circumstances can vary greatly; therefore it is a must to obtain advice from your tax preparer or investment advisor to determine how the sale of your home will impact your income taxes. More information can be found at Bankrate™, or from the IRS.
Many seniors own their home outright, and often have properties of significant value. Rather than refinancing a home, taking out the cash, and making payments in a "Forward" mortgage, many seniors are opting to obtain a "Reverse" mortgage where the lender sends you cash, but you do not make monthly payments. So, the amount you owe gets larger as you draw out more and more cash, and the interest is added to your loan balance as you go. As your debt grows, the equity in your homestead decreases, and if you have the loan for a long time, there may not be any equity left at the end of the loan. Payments to you typically paid in monthly installments, or you may opt to set up on a line of credit, there are many more options available to you as well. Be sure to work with a reputable lender that will not charge excessive or "junk" fees. Two great resources with detailed information on this topic can be found at the US Department of Housing and Urban Development and AARP which both have considerable advice on Reverse Mortgages.
Basically, a Life Estate is the process where a person, typically older, deeds their homestead to their designated heirs, typically their children, while retaining the use and enjoyment of the property until they pass away. The property cannot be sold while you are still living, unless the designated heirs that were listed in the Life Estate have given their consent to the sale.
Creating a Life Estate interest in your Real Estate is a valuable estate planning tool, as it can avoid or minimize a need to probate of the property, and can aid in minimizing the impact on your estate that may result from a Medical Assistance program if used by the person for nursing home care.
It is imperative that you consult your attorney regarding the creation of a Life Estate, as estate planning is very complex and requires expert legal advice.
Sometimes, senior citizens are no longer able to stay at home, and due to financial circumstances, enter a nursing home under the medical assistance program. If a person had their homestead placed into a Life Estate prior to August 1, 2003, then the County may not have a claim for medical assistance as a lien against the property. After that date, the lien filed by the County is a valid claim, and may need to be paid in full when the property is sold, subject to other jointly held interests in the property. A Life Estate is still a valid estate planning tool, and depending upon the longevity of the person, it can affect the percentage of ownership in the property subject to the medical assistance lien. Advice by your attorney is imperative when dealing with this issue, along with input from the County representative responsible for your file. To learn more on this topic, please visit Minnesota Healthcare Programs (MHCP).
If you're considering a move to downsize or relocate after retirement and are interested in a Free Market Analysis to determine the value of your home or need direction on getting your home ready to sale, please do not hesitate to contact us.