My father-in-law entered a personal care home today. The path to get us here was difficult. Proper information and preparation may have made it less so. I hope to share our experiences with you so that you can make the appropriate decisions now to prepare for the later years. Have you thought about life after retirement? Everyone strives for the day they can just kick back and enjoy the Golden Years, but what about the later years? Today, many individuals are living into their late eighties and beyond – beyond, in some cases, the ability to care for themselves.
Dad and Mom worked hard all their lives. They saved and lived a comfortable retirement. Both had pensions from their employers. Savings were invested in their IRAs and annuities with a small savings account for incidentals. Mom died in 2001 and Dad vowed to stay in his house until he died. In 2011 he was diagnosed with dementia. He gave up his driver’s license in November and was housebound. We soon realized he was not safe in his own home; he had to move into a personal care home. Up until this point no one had really looked at his finances.
The personal care home required assets to cover the first three years of expenses. This should not have been a problem, but 80% of his assets were tied up in an IRA and annuities. Tax mitigation became the first order of business. As a World War II Veteran, I learned he could be eligible for a VA pension. The pension could cover the remainder of his out-of-pocket costs. The VA pension has very specific income and asset limitations. He would be qualified as long as his IRA distributions did not exceed that income level. We also needed to address his assets. (More on VA benefits in an upcoming Insight.)
Deciding it was time for Dad to move was only the first step. Now we had to tackle what to do with his home. Prepare for the long term since selling a parent’s residence may take much longer than expected. If you are facing this situation, talk to your taxing authorities and your insurance agent. We prepaid Dad’s property taxes. Taxes can be prepaid only in this situation, where the resident is moving to a care facility. Insurance on an empty house is also much higher than on an occupied dwelling. To save money, turn off non-essential utilities, unplug appliances, and turn down the heat. Change mailing addresses and make sure you forward mail. Note that the utility company may require a sales tax waiver if the billing and service addresses are different.
In this short series of Insight articles, I will address a few topics we should all think about for our parents or ourselves when entering the Golden Years. Future installments: Tax Planning for Retirement, Asset Planning, Health Considerations and VA Benefits.
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