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?
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.
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.
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.
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.
One less decision for me to make...!