Will a Senior Living Facility Cost Your Kids an Inheritance?

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One popular money script is, “I need to leave an inheritance to my kids.” Yet choices that parents make based on this money script can result in both failing to leave an inheritance and even costing children money. Here is one way that might happen.

My town is home to a senior living retirement community that provides care for an individual or couple in all stages of retirement, including independent living, assisted living, and nursing home care. The cost for a couple includes a one-time, non-refundable fee from $100,000 to $300,000, depending on the size of the unit selected, ranging from studio apartments to townhomes. There is also a monthly stipend that varies with the services provided, typically between $1,500 to $3,500. Fees for assisted living and nursing care are higher. As health declines and the needs for more services arise, a resident can access these services.

However, one can’t wait until a health crisis to move into this all-inclusive senior living facility. All new residents must be able to live independently, pass a physical, and have adequate assets to meet the monthly stipend and miscellaneous living expenses. This makes timing critical, especially since the waiting list for such facilities can be up to five years.

When the resident passes away, there is no equity to pass to heirs. Basically, what a person is buying when they move into this facility is a form of long-term care insurance. The IRS allows around two-thirds of the upfront fee to be deducted from income as a health expense.