“How do children nudge often reluctant parents toward making sound and fiscally smart decisions about the future of the family home?” asks a recent article in the New York Times. “How can assets be protected while keeping a roof over the parents’ head?” And the toughest question of all: “How do children…begin the difficult and sometimes painful conversations needed to resolve these issues?”
For many, a home is the biggest asset they will ever own. Protecting this investment involves strategizing. For example, individuals can gift someone (other than a spouse) as much as $5.25 million without paying federal estate or gift tax. This means that taxes can frequently be avoided by selling the house while parents are still alive. Gifting a property can also help a person qualify for Medicaid, which can be important when parents need nursing home care.
So what’s the best way to broach this delicate subject? Here are a few suggestions from the Times:
Don’t procrastinate: Anyone’s health can change in an instant. Furthermore, memory loss or “fuzzy thinking” can hamper a person’s ability to make complex decisions and navigate complicated legal documents. Act now, while your parents are in good health.
Use ice breakers: You might mention an article you read about estate planning. Or, suggests one estate planner, explain that you’re doing financial planning regarding your own home, “and then segue to asking your parents what they’d like to see happen to their home.”
Take it slow: These are hard conversations. Don’t feel the need to cover everything in one sitting.
Set priorities: While tax considerations are important, parents and children must decide what is most important: keeping parents at home, or protecting them from heavy taxes. “The main issue is what works for the family. Taxes are important, but they shouldn’t drive the decision.”