Selling a parent's house to pay for care: lump sum or monthly income

Many assisted living and memory care communities ask for an entrance fee or a deposit, and the first months often overlap with the costs of the house your parent left. A cash sale pays everything at closing, so those costs can be covered at once.

We buy as-is, so the house does not need repairs, and your family can take what matters and leave the rest. We handle the cleanout after closing. If a deposit is due before closing, we can sometimes advance part of the proceeds.

With owner financing, your parent acts as the lender. The buyer signs a promissory note and a deed of trust that pledges the house as security, and pays your parent each month, with interest, for an agreed term. Those payments can be set to help cover the monthly cost of care.

The trade-off is time. The total collected is usually higher than a cash price, but it arrives over years rather than at closing. See how the price and the payoff length work together with our Name Your Own Price tool.

If your parent signed a durable power of attorney that covers real estate, the person named as agent can usually sign the sale for them. The title company reviews the document before closing and records it with the deed.

If there is no power of attorney and your parent can no longer sign, a court can appoint a guardian to sell with the court’s approval. We work on the court’s timeline.

The home sale exclusion lets a single owner exclude up to $250,000 of gain, or $500,000 for a married couple filing jointly, when the house was their main home for 2 of the last 5 years. A parent who moved into a licensed care facility because they could no longer care for themselves may qualify after living in the home for just 12 of those months, according to IRS Publication 523.

There is a trade-off to weigh. A house inherited at death generally receives a step-up in basis to its value on that date, which can erase the gain for heirs. Selling during your parent’s lifetime gives that up, and an owner-financed note does not receive a step-up either: the remaining gain is taxed as the payments come in. For many families the home sale exclusion covers the gain anyway, but when it does not, the timing matters.

Note payments are also income to your parent, which can affect eligibility for Medicaid and other benefits. A CPA, or an elder law attorney if benefits are involved, can tell you how these rules apply to your family.