In some areas of the country, assisted living communities often require a sizable upfront payment. A senior might sell a house for, say, $500,000. Buying into an assisted living community could cost $300,000 while the remaining $200,000 can be used for the ongoing maintenance fees.
Sometimes, however, a house sale doesn’t go exactly as planned. Your parents might need more time to sell a home, for example, while an entrance fee for assisted living is due. One option in such situations is to use a margin loan until the house is sold. Eventually, when the house is sold the loan can be repaid–this may keep a senior from liquidating securities and perhaps incurring capital gains taxes.
If your parent’s house can be sold, sooner or later, does it make sense to roll the proceeds into an assisted living community? People in their 90s might be better off paying rent rather than buying. When people are in their early 80s or younger, with good longevity prospects, they might be better off buying in, provided they get some attractive benefits, such as guaranteed long-term care.
