# Using home equity to help pay for assisted living



## Gary (Jul 13, 2017)

My mother is in her mid-90's and lives in an assisted living facility.  She is incapable of managing her medications and/or finances - I am the Trustee for all her affairs. The problem is her expenses exceed her income by $2K/month.  Her income comes from a small pension, Social Security and the rental income from her house.  The house is worth approximately $750K, is paid-off, in good working order and property taxes are protected by Proposition 13 (the same family has rented it for the last six years).  All of her other financial resources (savings, stock, bonds, etc...) have been used up - she only has the house.  

I have visited numerous financial institutions and all have told me the owner has to live in the house to qualify for a Reverse Mortgage and/or Home Equity Line of Credit.  I do not want to sell the house and lose the rental income (~$30K/year).  I would like to somehow slowly draw down on the houses equity until at later date sell it to 1) settle the loan and 2) distribute her estate.  The house is in her Trust and for tax purposes the Trust has an Employee Identification Number (EIN).


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## Lon (Jul 13, 2017)

Don't fool around worrying about renters, reverse mortgages etc. SELL THE HOUSE!! You should have no problem getting at least 4 to 5% on the proceeds of the sale and that is more than adequate ro make up the shortfall with your mothers monthly care. I don't need assisted living at this point in my life but sold my home three years ago in anticipation that my guaranteed monthly pensions & income might not be sufficient to take care of my future needs.


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## Aunt Bea (Jul 13, 2017)

I agree with Lon, sell the house.

One question though.  If the house is in a trust and your mother has no assets in her name, can't you apply for medicaid to help pay for her expenses while in the assisted living facility.

Good luck!


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## Lon (Jul 13, 2017)

Where is the rental income of 30k a year going? Wouldn't that be sufficient to take care of the shortfall, or is this money that you use?


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## Gary (Jul 13, 2017)

Lon said:


> Where is the rental income of 30k a year going? Wouldn't that be sufficient to take care of the shortfall, or is this money that you use?




Everything goes to her care.  If she sells the house then she's giving up $30K in income - all of which goes toward her care.  The challenge is to keep the house (for it's monthly income) and slowly draw down on its equity.  I believe that selling the place and using the balance to satisfy the immediate nee is not the most cost effective answer to the question.


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## Lon (Jul 13, 2017)

Gary said:


> Everything goes to her care.  If she sells the house then she's giving up $30K in income - all of which goes toward her care.  The challenge is to keep the house (for it's monthly income) and slowly draw down on its equity.  I believe that selling the place and using the balance to satisfy the immediate nee is not the most cost effective answer to the question.



You can accomplish the same thing by selling the house and investing the $ 275,000 and drawing down on Principal and interest. Also---no more worry about property taxes, insurance & upkeep.


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## terry123 (Jul 14, 2017)

Sell the house!


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## Lara (Aug 20, 2017)

Gary, I would say keep the house if it's in a good location for increasing in value, it's paid off, and making rental income of 30k a year..and you say there's no property tax since it's protected by Proposition 13 (Or because the house is in a trust? Or both?). The renters have been there 6 years...is it time to raise the rent?

Can your mother qualify for medicaid since the house is in a trust like Aunt Bea suggested? Can you pay the extra expenses out of pocket (keep track) and then reimburse yourself with estate settlement money later? Would it be a lot less expensive for her to move in with you and then hire a caregiver to come in as needed for her (social services?). It sure is a dilemma for many.


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## Gemma (Aug 20, 2017)

Gary, do you also have power of attorney over your mother?  

A trustee is named to manage an estate after one passes away.  The trust names you (or her other heirs) as beneficiary. When she dies, title to the property will bypass probate.  Since you stated in your original post that her home is in a trust, that is how it works.

And, that's true...one must live in the home to have a reverse mortgage.


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## Lethe200 (Aug 22, 2017)

I think you're in a bind here. I can understand not wanting to sell the house: 
- the rental market is pretty solid in CA
- tax write-offs (depreciation/expenses) are always useful
- selling means you need $54K/yr instead of $24K/yr (if I'm reading your original post correctly; if not I apologize) for her care shortfall

But if you can't raise rent substantially, I don't see how you can utilize the house's equity. If the banks won't loan it to you, there's no way to get around that except by going into the subprime market. And those guys are dubious, reputation-wise. I'd pay a lawyer to read a subprime contract before signing, that's for sure. 

I assume you have investigated doing an entirely new loan? Or is that even possible? It's the only way I can think of for holding on to the house while still pulling money out of it.


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