Selling a home is a significant financial transaction and seniors who may need to sell a home to help supplement the residency fees at a senior living community are advised to seek financial and tax advice. If you need to sell a home to help fund senior living costs, there are several options to consider. When the need for cash upon sale of a home is immediate yet the sale will occur some months later, there are companies such as Elderlife Financial Services, which offer bridge financing- this is a short-term line of credit to be used to help pay monthly residency fees while you wait to sell your home. (Your local bank may also offer you some bridge funding or even longer-term lines of credit depending upon your situation)

If you wish to sell your home to escape the maintenance and overhead obligations while moving into a senior living community, but have no immediate need for the cash equity, you should seek tax advice on the capital gains tax implications. If you are likely to incur a significant capital gain tax and will be needing some cash equity to supplement residency fees, consider doing a cash-out refinance, then rent your home. A Reverse Mortgage may not be optimal as bridge financing for seniors intending to move into a senior living community because of mortgage covenants requiring you to live at home, except that a short-term respite contract could be feasible. We work with experts in elder law who can advise you regarding transactions of this nature and complexity as this is but an example of what may be possible.

Not all long-term care insurance policies are alike. Unfortunately, some policies were underwritten prior to when assisted living became a care category and thus are silent on whether the policy covers assisted living or even dementia care. Most long-term insurance policies purchased within the last 20 years offer coverage for assisted living in one of two forms, an agreement to pay costs up to a maximum daily rate or a daily rate regardless of the actual costs of care. In most of these policies, coverage is triggered when the insured demonstrates the need for two or more activities of daily living or has significant cognitive impairment.

Activities of daily living include in most policies bathing, dressing, continence, toileting, eating and transferring. Policy language may include references to hands-on or standby care. The requirement of hands-on care has significant implications on a coverage trigger as many older adults are able to perform daily living activities but inconsistently and often poorly unless guided by a caregiver. Our staff will advocate for coverage especially in situations of erroneous denials of coverage.

Another form of long-term care insurance is a hybrid long-term care-life insurance policy. This product is very helpful to seniors who remain very active and healthy, but are interested in hedging the bet that eventually they need long-term care because unlike traditional long-term care insurance, the funds they place into the product remains within their control. Independent residents at a senior living community may be candidates to purchase such financial instruments as there is an underwriting criteria but not as extensive as traditional long-term care insurance. This product is appropriate for persons who want to receive a rate of return on premiums, while taking advantage of the morbidity credits available for buying into a pool. (The theory is for every 5 people who access the long-term care benefit, 20 will not, giving you more benefit.) If you do not ever use funds you invested into the financial product, the funds also act as whole life insurance.

Veterans or spouses of veterans who served during a time of war for a period of 90 days and was honorably discharged, may qualify for a tax-free benefit from the Veteran’s Administration called “Aid and Attendance”. The benefits range from just over $1100 per month to just under $2,000 per month. To qualify for the benefit, the applicant must show a need for two or more activities of daily living or have significant cognitive impairment. There is a means test but the cost of long-term care is deducted from your total income, and many residents of assisted living would financially qualify for Aid and Attendance benefits because after deducting the residency fees and cost of care, they are left with little or no income. Also, there is a soft asset test (no look back period) however, the VA has initiated reforms on financial eligibility which will mirror eligibility under Medicaid and the new rules are expected to go into effect at any time. Our staff works with elder law attorneys’ and VA benefit coordinators to help our residents receive the tax-free benefit. The application process can be lengthy but upon approval, the award is retroactive to the date of application. Elder Life Financial Services provides bridge funding so you get access to the benefit immediately.

Seniors who own whole life insurance with a face value of at least $100,000 may sell the policy to companies who deal in viatical settlements. For older-old adults, the sale of the policy usually yields significantly more money than what would be available by cashing-in the policy. Because the purchaser does not know when it can make claim on your death, all purchasers will offer an amount discounted off the face value which can confidently yield to them a good rate of return. However, older adults who have a chronic illness and functional impairment, many of whom are prospective residents of senior living, should be able to sell the face value of the policy for a modest discount.

Seniors who pay privately for the costs of assisted living may be able to deduct some or all of the costs on their income taxes. In the 1996 Health Insurance Portability Act (HIPAA), Congress authorized an itemized deduction on Schedule A of the unreimbursed medical expenses and this includes qualified long-term care expenses including personal care assistance and where applicable, maintenance services such as meal preparation. Residents’ who receive a doctor’s certificate as being chronically ill and possessed of functional deficits or significant cognitive impairment and is receiving assistance with activities of daily living in accordance with a care plan devised by a licensed health care practitioner, can deduct much if not all of their residency fees on their taxes. If the principal reason for the residency is a medical necessity, up to 100% of the residency fees may be deductible. If you are able to utilize itemized deductions, then all unreimbursed qualifying medical expenses above 7.5 % of your adjusted gross income may be deducted from your taxes. Residents who are not chronically ill but need some support such as with medication management could deduct those items of care which are medical in nature. If the entrance fees are attributable to a medical service such as performing functional assessments, that portion of the work can be deducted from one’s taxes. Our staff works with tax professionals to assist our residents to maximize tax savings while a resident at our community.

To be able to claim payments to a long term care facility on behalf of a parent, for example, the key for tax rules is whether you can claim that person as your dependent. If your parent is your dependent it is because you pay more than 50% of their support from all sources. Once the parent meets the dependency test, any and all medical expenses you pay on their behalf may be deducted on your income taxes as set forth above.

Residents of an assisted living community who receive assisted living services but are at or near the point of exhausting their savings can apply to the state for assistance. The State of Connecticut has created a Private Assisted Living Pilot Program designed to augment the assisted living service costs when the resident has been paying fees but is running out of savings. The program is limited to 125 persons who show that they have spent down their assets while residing within a private-pay assisted living community. Connecticut residents 65 or older, who are at risk of nursing home placement after an assessment, and who meet income and asset means tests can apply for funding. There is a state-funded payment administered through the Home Care Program for Elders, which has an asset test but no income limit, and a Medicaid Waiver Program, which has both a strict asset and income test. The senior living community if it qualifies to receive funding may reserve the right to move you into a shared two-bedroom unit depending on the financial condition of the resident.