What Should You Do With Your Old House After You Retire?
You don’t have all your plans for retirement worked out yet, but you are certain that you do not want to continue living in your current house. The D.C. suburbs are for workaholics and ambitious students, not for carefree retirees like you. Therefore, you have decided to relocate to an area that better fits your vision of happiness. What should you do with the house where you lived for decades and paid off the mortgage? A house in the Maryland suburbs of Washington, D.C. is a valuable asset, but your decision to keep it, sell it, or rent it out as an investment property depends on non-financial considerations as well as financial ones. A Washington DC estate planning lawyer can help you strategize about how your paid off empty nest fits into your retirement plans.
Should You Sell It?
If you sell your house, you will get a large sum of money, and what you do with it is up to you. You can use it toward the purchase of a new house in a much less expensive location. Houses almost anywhere else cost less than they do in the D.C. suburbs, and your new house will probably be smaller than the one where you raised your children. Therefore, you may still have plenty of money left in the bank after buying a new house.
Even better, the capital gains tax deferral works to your advantage. You can delay paying taxes on the first $250,000 of appreciation in your house’s value if you owned the house as an individual. If you and your spouse owned the house jointly, then the amount eligible for capital gains tax deferral is $500,000.
Should You Rent It Out as an Investment Property?
If you can’t stand to cut ties with your family home, then you might consider renting out your empty nest as an investment property. Financial planners often say that your house would make a good investment property if the rental income you can get from it each month is equal to at least one percent of the house’s resale value. That is a tall order in the D.C. suburbs, where real estate is very expensive. Whether you decide to rent out your house or sell it should not be based strictly on a dollar amount, but rather on whether the income you can get is worth the hassle of being a landlord. Owning and managing an investment property takes work; it is misleading to call it passive income.
Should You Lend It or Gift It to a Family Member?
The option remains just to keep your house in the family. You can let relatives live there and pay little or no rent. What better way to build generational wealth? You can also transfer the title of the property to a family member, but gifting a real estate property requires a lot of planning. If you plan to qualify for Medicaid nursing home care, you should wait at least five years after you gift your house to a family member before you apply for Medicaid.
Contact Us Today for Help
An estate planning attorney can help you if you have decided to move out of the suburbs when you retire. Contact Tobin, O’Connor & Ewing for help.