Dear Mrs. Riches:
My wife and I are getting on in years and have a problem figuring out what to do with our family home. We have a fabulous house that we'd like to keep in the family and truthfully, would like to live out our days here. It's big and requires an enormous amount of upkeep that we don't feel up to doing anymore but all the same, it's where we raised our children and is in an area that we love, with good neighbors and in reasonable proximity to good medical care.
Our issues and corresponding questions are numerous: 1) Can we live on our own indefinitely? 2) Is it practical to expect a family home to stay in the family or are we putting an undue burden on our kids when we pass on? 3) Should we just sell the house now? 4) If we hang on here in the house, do you have any good suggestions for how older folks manage upkeep? Your advice will be invaluable as my wife and I wrestle with what to do.
--Hanging On to the Homestead
Dear Hanging On:
Kudos to you and your wife for asking these tough questions of yourselves now, while you can be an active part of the planning process. Waiting for your kids to gingerly bring up the issues or worse, for a medical crisis to force a decision, would be a far less desirable option.
You'll first need to summon up your best communication skills and patience as you navigate these emotionally charged topics with your spouse and children. Some folks don't like thinking about, much less talking about, the death (or illness) of a loved one, which can make it really tough to plan. But forge ahead; it will be helpful to your children to hear your wishes. It will also help you to determine whether bequeathing them the house will be a boon or burden.
Leaving your children the house when you pass on isn't your only option, of course. Why not consider selling the house to your children now? The proceeds on the sale of your principal residence -- up to $500,000 for couples, and $250,000 for singles -- will be tax-free, thanks to the Taxpayer Relief Act of 1997. Your kids-turned-landlords can then rent the home back to you for a fair market rent, in which case they may be eligible for certain deductions and tax breaks. Or if they are feeling generous, they can allow you to live rent-free. Another plus? If something breaks or needs routine maintenance, you have a lot of leverage with the landlord. ("Son, fix the leaky roof or I'll drag out the pictures of you in junior high.")
As for your longevity, you can peek at your family tree and personal health history for clues. But because you simply can't predict how long good health will allow you and your wife to live on your own, you'll have to make the best decision using the information available.
Here's some of what you'll want to determine in planning for a decline:
- What care-giving options are available in your community should one of you need more care than the other can reasonably provide?
- How much does long-term care cost?
- Can your finances accommodate a range of care-giving options?
- Do you have an advance directive in place?
- Is there a family member who is willing to play a care-giving role?
It's not the most fun stuff to consider, but learning your options will expedite good decision-making should something threaten your health. Do also discuss all of the possibilities with a financial professional who can help develop a comprehensive plan for handling your estate. Having sound financial and care-giving plans will help you feel more secure as you face the challenges (and joys) of advancing age. Best of luck.