My mother needs to go into a nursing home. The only way we can afford it is to get a line of credit on her property. Can I apply as POA? - AgingCare.com

My mother needs to go into a nursing home. The only way we can afford it is to get a line of credit on her property. Can I apply as POA?

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My sister has been taking care of my mother for the past 10 years. However, our mother has become much harder to care for as she has dementia and several physical problems. It’s become too much for my sister to handle and her own health has been suffering because of the constant stress of taking care of Mom. Our only option is to put mom in a nursing home, but she does not have the liquid assets to pay for her care. In that regard, as mom’s POA I want to apply for a HELOC to cover the cost of the nursing home. My mom’s property is valued at around $1,000,000 and we are looking for a loan line of about 450,000 to pay for her care for up to the next 4 years, although we don’t believe Mom will last that long. Is there going to be a problem for me, as mom’s POA to get the HELOC approved so that we can care for her in the nursing home?

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Capital gains will be paid for above 500k on the house. Again the higher taxes will be offset somewhat by nursing home care.
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Reply to MACinCT
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I manage my mom's sustancial liquid assets in 3 separate money market accounts. Last year was a good year and she regained expenses from the year before. My family did this year's ago. You may want to sell the home as capital gains would account for gains above a certain level and not for the entire house. It will take you a while to sell and remove furnishings. It is too bad that she is in crisis now when this could have been done a year ago. She could have remained in the house while on the market.I recommend that you consult a tax attorney about selling a d to help with complex tax preparation. You will find that nursing home and memory care accounts for a hefty tax deduction. Your need of 450 k over 4 years sounds kind of high. I only withdraw from those accounts a few 10s K when she needs it so that the accounts bear good interest depending on the market. I recommend Vanguard which can mostly be done online or a Charles Shwab account. You can also hire a financial advisor but ask if he is a fiduciary.
I don't know about a HELOC.
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Reply to MACinCT
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I manage my mom's sustancial liquid assets in 3 separate money market accounts. Last year was a good year and she regained expenses from the year before. My family did this year's ago. You may want to sell the home as capital gains would account for gains above a certain level and not for the entire house. It will take you a while to sell and remove furnishings. It is too bad that she is in crisis now when this could have been done a year ago. She could have remained in the house while on the market.I recommend that you consult a tax attorney about selling a d to help with complex tax preparation. You will find that nursing home and memory care accounts for a hefty tax deduction. Your need of 450 k over 4 years sounds kind of high. I only withdraw from those accounts a few 10s K when she needs it so that the accounts bear good interest depending on the market. I recommend Vanguard which can mostly be done online or a Charles Shwab account. You can also hire a financial advisor but ask if he is a fiduciary.
I don't know about a HELOC.
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Reply to MACinCT
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I would get advice from a CPA or a tax and estate attorney who is familiar with property in the area.
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Reply to Becky04473
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Alfred, thanks for the excellent and knowledgeable answer. We're not even remotely in the area of estate tax, so I guess this won't apply. But it's interesting to know. I'm going to share that with the investment rep the next time I speak with him; he was the one who raised the issue.

One less decision for me to make...!
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Reply to GardenArtist
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GardenArtist - an election can be made to value an estate's assets six months after death, but only if such an election results in a decrease in the estate tax. Your attorney may be thinking of the old rules which would allow the election to be made even if the value increased from the date of death.

Before the law was changed, you would make this election if there was no estate tax due so that you could claim a higher basis when the asset was sold, and pay less in income tax. Now, you can only make the election if the value decreases and results in a lower estate tax. With the significantly higher estate tax exclusions now available, which make very few estates subject to the tax, this election would be very rarely used.
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Reply to AlfredR
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Sorry, I missed the point of your original question. Read the DPOA carefully and see if it authorizes property management and/or sale. Then discuss that with the bank you've chosen as potential mortgagee on a HELOC. The bank probably would want a copy of the DPOA document for review by its legal team.

So before doing anything else, find out if your bank would approve a HELOC signed by a proxy.

Getting a HELOC would avoid the issue of drawing down on what liquid assets she does have.

The question remains what would be done with the house during the time that your mother is in a facility.

You're thinking is on the right track by addressing these issues now.
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Reply to GardenArtist
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Barb and Alfred both raise good, legitimate points.

If the house is vacant, insurance will soar. I'll be paying almost $1K extra to insure my father's property until I can sell it. And coverage will be less extensive...more for less.

If the property is rented out, you'll need to create management and security systems to ensure that value of the property isn't degraded by tenants. We had a rental lake cottage which for the most part produced good income. But problems occurred with some tenants, sloppy care resulted, as did the need for repairs which my father handled himself.

Eventually, it became too much (including for me as I had to handle the winter issues while my parents became Snowbirds).

If the property is rented, you might want to consider a professional manager with a real estate management firm.

With a $1M value, you are in the tax bracket that Alfred addresses. Tax advice from an accountant or tax attorney might be useful.

I learned something new about step-ups. I thought that the value of assets were stepped up on the date of death, but one of the investment advisors told me that I can actually select the step-up date.

I want to discuss this with my attorney (who also practices tax law), but if this is true, and if I can hold off selecting a step-up date, I'll track the stock and wait till it hits a peak, research the predictions, and decide on a step-up date then.
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Be careful of the income tax consequences of selling the property. Assuming your mom is single, she can only exclude the first $250,000 of gain on the property. A line of credit may not be a bad idea. If you sell the property after she passes, then the basis is "stepped up" to its value at death, and there may be no income taxes to pay.
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Reply to AlfredR
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Why not sell the property to fund her care? Or rent it out?

Is the house going to be empty once mom enters a care facility? That brings high insurance costs, for one thing.

Is the home her only asset? How much income does she Have?
If nothing else, you should seek the advise of an eldercare attorney about how best to fund mom's care.
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Reply to BarbBrooklyn
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