Installment sales work best in real estate investing with free and clear properties, properties that don’t have any debt against them, no mortgages against them.
Many sellers of real estate are concerned with capital gains tax. Installment sales help with that. They don’t decrease capital gains tax, they spread it out so that the tax burden is bearable.
As a real estate investor you can buy on installment sale, and help the seller be the bank with their residence.
Being the bank is a good way to create a Private First Mortgage in first position, and if you as the borrower do not pay, they can repossess the property and resell it.
When we buy on installments sale we protect the seller by giving them a quick claim deed held in an open escrow, so they do not have to worry about foreclosing to get their property back.
Buying on installment sale helps the seller save money (defer taxes) in taxes and diversify the retirement accounts. If something happens in the stock market that creates losses, to steady income stream of the installment sale note can diversify the risk of retirement accounts.
There are other benefits for the seller:
If you receive too much money over the course of 12 months and you are retired, your Social Security can be taxed.
From the AARP:
If your total income is more than $25,000 for an individual or $32,000 for a married couple filing jointly, you must pay federal income taxes on your Social Security benefits.
Below those thresholds, your benefits are not taxed.
The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:
up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly.
up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple).
I really think that taxing Social Security benefits is ridiculous. You have earned that money. It should not matter how much your income is to get full Social Security benefits.
Assisted living facilities give aging adults an opportunity to hold on to their independence as long as possible before they require more intensive, full-time care that nursing homes provide. The assisted living option is particularly appealing to older adults who need some help with day-to-day activities — considered activities of daily living, such as bathing, dressing or preparing meals — but who don’t require 24-hour care.
On average, an adult in the United States who reaches age 65 can expect to live for more than 18 additional years, according to an August 2022 report from the National Center for Health Statistics (NCHS). The federal government estimates that 7 in 10 of those turning age 65 today will need some form of long-term care in their lifetime; 1 in 5 will need it for more than five years.
By design, assisted living facilities consist of single apartments, private rooms with transitional spaces or semiprivate, shared rooms to meet residents’ needs as they age or their income changes. Most assisted living facilities offer a range of services:
You’ll find assisted living residents enjoying games and trivia activities, movie nights, hair salons and stocked libraries as well as access to shuttle services.
As the focus on care for Alzheimer’s disease and other forms of dementia broadens, stand-alone memory care assisted living facilities are available, in addition to assisted living memory programs or separate wings devoted to residents with memory loss.
If an assisted living resident requires medical care or hospitalization, Medicare will cover health services performed in a doctor’s office or hospital, much like Medicare does for beneficiaries in any living situation.
Paying for Nursing Home Care: The Different Roles of Medicare and Medicaid
Q. My 85-year-old father is in a nursing home and his long-term care insurance has nearly run out. I’m told that under the new law he will have to sell all his assets to be eligible for 100 percent Medicare benefits in the nursing facility. Is this true?
A. No — at least, not in the way you seem to think.
As so many people do, you’re confusing Medicare and Medicaid.
These programs are entirely different.
And nothing in the new law changes existing laws that relate to paying for nursing home care*.
Medicare Defined
Medicare is a federal program that covers a wide range of medical services for people age 65 and older and some younger people with disabilities. Medicare covers these services regardless of whether enrollees live in a nursing home or in the community — for as long as they live — provided that their monthly premiums continue to be paid. But Medicare does not cover any “custodial care” — that is, the costs of a room, meals and help with daily tasks such as dressing and bathing that a nursing home provides — and never has. (The only exception is coverage for short-term stays in a skilled nursing facility, most often for a few days or weeks of continuing care or rehabilitation after being in the hospital, as explained in this previous Q&A.)
Medicaid Defined
Medicaid is the nation’s medical safety net, providing health care assistance for certain groups of people (including those over age 65) whose incomes and financial resources are very low. Though mainly funded and guided by the federal government, Medicaid is run by the states and eligibility rules vary among them. (The program is also known by different names in some states — for example, Medi-Cal in California, TennCare in Tennessee and MassHealth in Massachusetts.) But, nationwide, Medicaid does pay the costs of nursing home care for people who are eligible.
Most people who enter nursing homes do not qualify for Medicaid at first but pay for the very high costs of this care through long-term care insurance or out of pocket until the insurance runs out and/or they have spent down their savings and are then eligibile for Medicaid.
Eligibility depends on a means test.
Your income and assets must be under a certain dollar level set by your state.
Certain assets may be exempt —
– up to about $2,000 in savings,
– investments or other financial resources that can be turned into cash;
– a life insurance policy with a face value of up to $1,500 and
– a burial plot worth up to $1,500.
If you are married and own a house together, your spouse can continue to live in it as well as keeping all furniture and household goods and one automobile.
If the house is sold, the proceeds are regarded as joint assets and some will go to Medicaid to help pay for the cost of your nursing home care.
After you and your spouse die, Medicaid could go after the proceeds of the estate to help reimburse the nursing home costs.
But be warned:
==========>> You cannot give away assets or sell them for less than market value to qualify for Medicaid nursing home help faster.
In assessing your eligibility, Medicaid officials will examine your financial records going back five years to look for asset transfers.
If they find one that falls outside the rules, your Medicaid coverage for nursing home care would be delayed by a certain length of time, according to a formula that divides the transfer amount by the average monthly cost of nursing home care in your state.
So if, for example,
you made a gift of a house worth $250,000 to a family member or friend, or
– sold it at far less than its market value, and
the average monthly nursing home cost in your state is $5,000,
your eligibility for Medicaid coverage would be delayed by 50 months ($250,000 divided by $5,000 = 50).
The same rule applies to transfers of cash or other assets.
There are some exceptions to this rule.
To take just one example: If you are not currently married and have an adult child who has lived in your home and looked after you for at least two years before you enter a nursing home, you can transfer the title of your home to that child without any delay in coverage.
This is only a thumbnail sketch of the many rules that govern Medicaid eligibility for nursing home care, many of which vary from state to state.
To find out how the rules apply to you, you or a family member may need to consult an informed counselor or a qualified elder law attorney.
You can get a lot of information from your state’s heath insurance assistance program (SHIP), which is a public service that provides personal help from trained counselors on all Medicare and Medicaid issues at no charge.
To find SHIP counselors in the state where you or your family member is living in a nursing home (or will soon enter one),
SHIP counselors could also put you in contact with an elder law attorney if you need one.
* Note: The new health care law does introduce a new voluntary insurance program that allows working people to contribute money from their earnings in return for daily cash payments later on if they develop a disability or a medical condition that impairs daily living activities.
The payments can be used toward the cost of assistance in your home, in an assisted living facility or in a nursing home.
But they wouldn’t be enough to cover the full costs of permanent residency in a nursing home.
This program (known as the CLASS Act) is still being organized and full details of when it will begin and how it will work are not yet known. For more information,
