For many people, the home is the single most valuable asset in the estate. It may also carry emotional weight, family history, and expectations about inheritance. But as you approach retirement or begin planning for the future, the question arises: should you hold onto the property, or would it make more sense to sell?
This is not a purely financial decision. It involves healthcare planning, legal considerations, tax exposure, and practical questions about what is best for your heirs. In some situations, keeping the home aligns with your long-term goals. In others, selling may create more flexibility, protect more value, and reduce complications later on.
How Real Estate Affects Long-Term Care Planning
The primary concern for many older adults is long-term care costs, not necessarily real estate taxes. A private room in a skilled nursing facility averages around $100,000 per year in many parts of the country. Medicare does not cover long-term custodial care. Medicaid does, but eligibility depends on your income and the value of your assets.
In many states, a primary residence is often exempt while the applicant is living in it. However, once the person moves into a care facility and no longer resides in the home, the exemption becomes more limited. The state may also seek reimbursement from the estate after death through a process known as estate recovery.
That means the home may still be subject to a Medicaid claim, even if it was protected during the owner’s lifetime. Selling the home in advance, depending on the timing and the planning tools used, can help convert the equity into other forms that may be shielded more effectively.
Scenario: Keeping the House Creates a Medicaid Roadblock
As a hypothetical scenario, consider a widowed homeowner in South Carolina, age 78. She begins to show signs of early-stage Alzheimer’s. Her children assume the home will stay in the family and are unaware of the risks. She moves into a memory care facility and applies for Medicaid two years later.
Because she no longer lives in the home, the residence is now considered a countable asset. The equity exceeds the allowable limit. She must either spend down the value or attempt to transfer ownership. Unfortunately, any transfer within five years of applying for Medicaid may trigger a penalty period under the state’s look-back rules.
Had the family sold the home fast for cash or through a conventional real estate sale and worked with a planning attorney to reposition the funds (possibly through a Medicaid Asset Protection Trust) they might have preserved a significant portion of the value.
When Selling May Be the Right Decision
Selling the home can offer several advantages. First, it may eliminate ongoing expenses such as property taxes, insurance, and maintenance. Second, it may allow for a simpler division of assets among children or other heirs, especially when no one plans to live in the property after your death.
Proceeds from a home sale may also be used to fund long-term care insurance premiums, purchase an annuity, or create a trust that supports specific beneficiaries. In some cases, it can help qualify the owner for Medicaid or veterans’ benefits while still preserving control over how the money is used.
The tax impact must also be considered. Homeowners may exclude up to $250,000 of capital gains on the sale of a primary residence ($500,000 for married couples filing jointly), provided they meet the two-out-of-five-years ownership and residency requirement. This exclusion does not apply if the home is inherited and later sold by the heirs at a gain. Selling during your lifetime may therefore allow for better tax treatment.
Scenario #2: Selling Simplifies a Blended Family Estate
Let’s say that a man in Wilmington, North Carolina, has remarried after raising three children from a prior marriage. He owns the family home outright. In his estate plan, he names his current spouse as the primary beneficiary of his retirement accounts and life insurance policies. He plans to leave the home to his children from his first marriage.
After discussing the situation with his estate planning attorney, he realizes this plan may create conflict. His current spouse has no legal claim to the house, yet she may be asked to move out quickly after his death. The children may also disagree over whether to sell or keep the home.
By selling the property during his lifetime and placing the proceeds into a trust with clearly defined distribution terms, he is able to provide for his spouse and children in a balanced and predictable way. The outcome is cleaner, and no one is forced to negotiate under pressure.
Other Considerations Before Selling
While selling makes sense in many situations, it is not always the best choice. If your plan includes allowing a child with special needs to remain in the home, or if you are using the home as collateral for a reverse mortgage or care agreement, you should consult with an attorney before making any decisions.
It is also important to consider whether your state’s Medicaid rules treat the sale as a transfer for value or as a disqualifying transaction. Timing, documentation, and the use of any proceeds should be carefully reviewed.
Final Thoughts on Selling Your House
There is no single answer to whether you should sell your home as part of your estate plan. In some cases, holding the property makes sense. In others, selling offers more flexibility, better protection, and greater peace of mind. The right choice depends on your goals, your health, your family structure, and the tools available under state and federal law.
A careful review with an estate planning attorney can help you decide how your home fits into the broader picture, and whether it should be passed down, sold, gifted, or placed in trust.
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