***9 Steps for Handling Your Parents' Real Estate In A Tough Economy

You may hope it will never happen, but one day you may find that your parents or older relatives need your help to manage their home. How will you carry out the sacred trust of getting the best price or helping them keep the property, and age in place?

Good communication is the key to success. David Solie, author of “How to Say It to Seniors,” counsels you to let the older person talk. Listen to their stories of life in the home. Then explain the financial aspects. If you have any doubts about their level of understanding, have them repeat what you said in their own words.

Before you engage in any decision making follow these 9 steps:

#1. Calculate the best financial course to take. Visit www.HomeInstead.com where you can use an online calculator, “Too Close For Comfort,” on which I consulted, to determine if it really is financially better for Mom or Dad to stay put or move in with family. If the decision is to sell, you will need to explain some hard to understand legal and tax concepts amidst this emotional turmoil.

#2. Check out Medicaid: Home ownership does not disqualify you from applying for Medicaid, if you are otherwise eligible. Medicaid is a Federal program, but each state has different rules. If one of your parents needs to go to an assistive facility, the Medicaid Homestead Exemption does not count the home to determine eli¬gibility, if the their spouse still lives there. The house is also not counted as an asset if an adult child lived there for the preceding two years and acted as a caregiver. But, after the death of the Medicaid recipient there can be recovery against the equity in the home, if the spouse/adult child no longer lives in the home.

#3. Check out Reverse Mortgages: Available only to homeowners over the age of 62, a reverse mortgage is an annuity collateralized by your home. The technical term for the reverse mortgage is the reverse annuity mortgage, because the homeowner can collect a tax - free monthly check for the rest of their life, no matter how long they live. Some reverse mortgages allow a lump sum instead of a monthly amount. The amount and cost of the reverse mortgage is based on the age of the homeowner when they take the mortgage, the value of the home, and the interest rate at the time of the mortgage closing.
Reverse mortgage income is not taxable, and the real estate taxes are deductible. The loan is paid back upon moving, selling the home, or upon the homeowners death. There is a cap on the amount that can be borrowed, but the cap is getting larger and larger. At demise, there may be no equity left in the home, but not necessarily. If the home has appreciated, it is possible that heirs can pay off the mortgage and have an inheritance left.
Recently, the reverse mortgage was sanctioned to be issued at the closing of a home purchase. This means that if Mom and Dad decide to sell their home, and buy a smaller one, they can pocket the proceeds of the sale, and buy the new home with a reverse mortgage. In this way, they can use all of their equity to fund their future and still be homeowners. The AARP helps you compare plans at www.aarp.org/revmort, and down¬load the program, Home Made Money; see also, National Reverse Mortgage Lenders Association (www.reversemortgage.org). Wendy Whitaker of Princeton Mortgage in Pennington, NJ specializes in writing these reverse mortgages. She says that “the new rules permitting the reverse mortgage for a new purchase is a great boon for seniors looking to downsize their homes. Now they can do that, and get income as well.”
#4. Consider selling a Remainder Interest: If parents own a co-op or condominium, or even a private home, they may be able to sell it and still live in it. The price, of course, is set low, discounted for the years they plan to stay. The buyer takes the risk of their longevity. This works most easily with family mem¬bers as buyers, but many co-op and condominiums allow these programs with investor/buyers.
#5. Consider a Sale - Leaseback: A related strategy is to sell the house outright, and lease it back from the buyer. Your parents get full, present market value, but they are responsible under a lease. In all cases, an attorney will negotiate the terms and protect them under the usual landlord–tenant laws. Of course, they also lose the upside potential for the growth of equity.
#6. Consider Life Estates and Life Leases: These are both traditional estate-planning strategies that allow your parents to transfer the home to you or other person and live there without interruption, for as long as they want. Done correctly, life estates and life leases keep the value of the home out of the estate for tax pur¬poses, but preserve the step up in basis. When your parents transfer a home but keep a life use, they get the tax bills but they still get any senior tax breaks that the locale allows. The property can never be sold without their written consent.
#7. See your accountant: When transferring an appreciated home to an heir during their lifetime, remember that your parents do not get the "step up in basis” they would get if they left the home to you at their death. Sale–leasebacks and life estates/leases may still get the step up, because occupancy does not pass until death. Check with your attorney and accountant for proper structuring.
#8. Check your zoning: If a parent is slated to be with you for a long time, you may need to build a separate apartment for them on your grounds. This is called an Accessory Apartment. Many counties allow zoning for this, so long as the occupant is a parent.
#9. Contact senior savvy professionals: Senior Real Estate Specialist www.seniorsrealestate.com are trained to be able to communicate with senior sellers, and to find suitable replacement homes. Geriatric care managers also help relocate when there is need for long term care.

For more information on handling your parents affairs visit www.LongevityClubOnLine.com, where you can “Connect to Adriane,” post your questions on the social page, and listen to her call in Internet radio show.