After a homeowner reaches the Golden Years, thoughts of retirement include the possible need for long-term care and the expense that comes with choosing either in-home or assisted living care.

A senior friend of mine allowed me to pry into his gray matter regarding this issue: "How are you planning for your future living arrangements as you age," I asked. He was quite candid. He said that he and his wife, both aged 67, recognize they have about another "good" 10 years before they'll need to consider altering their lifestyle.

They already live in a one-level home -- by design -- and are now playing with the idea of moving from the mountains where they currently reside to the warmer climate of Florida.

The biggest concern they have doesn't even center around the usual issues -- nearby health care, household care, being able to drive -- but rather if the move would place too many miles between them and their children, who live on the East Coast and in the Midwest region.

Not everyone requires assisted living quarters, but it's best to prepare for this type of care, rather than scurrying around if it dashes upon you as a result of sudden illness, such as a debilitating stroke.

The Assisted Living Federation of America paints an expensive picture for assisted living quarters, ranging from $15 to $200 per day for today's 1 million assisted living residents throughout the U.S. At the estimated costs above, the senior needing assisted living care will spend between $5,500 and $73,000 per year. How to pay for that care in the future is what may need to affect your real estate decisions now.

ALFA reports that 20,000 assisted living (AL) facilities house more than 1 million residents and that the average AL resident is a widow, aged 80. She may suffer from Alzheimer's or other ailments and have problems with mobility.

AL organizations may charge a monthly fee for assisted living, which may or may not include a basic fee, with additional charges for special services. Most assisted living organizations charge month-to-month rates, but a few residences require long-term arrangements, according to ALFA.

The bill is generally paid for by either the residents or their families. If the resident has planned for it, a long-term care insurance policy may be used to pay for the care. Some state and local governments offer subsidies for rent or services for low-income elders. ALFA reports that other states may provide subsidies in the form of an additional payment for those who receive Supplemental Security Income (SSI) or Medicaid. Some states also utilize Medicaid waiver programs to help pay for AL services.

If planned appropriately, a senior's current house could be used as an asset to help pay for the monthly fees of assisted living. First of all, get with your attorney and accountant to discuss your personal situation as to the ownership of the house, who would have power of attorney to make decisions for you if you suddenly become incapacitated, and how to handle the paper work to reduce tax and legal liabilities.

Many folks look to sell grandma's house and use the funds to pay for the long-term care by either siphoning off the gains from the sale each month or trying to invest it so that the interest payments pay for the long-term care -- both options can work if there's enough money. With the national average sales price of a house at $154,000 -- that money's not going to go very far, especially if there is a mortgage balance to re-pay.

Another option, however, is to convert the property from a liability to an asset that creates a cash flow that can be used to pay for the assisted living care. In other words, rent out the house. If it's doable in the community, you could possibly divide the house into two or three units and rent them out. The cash flow from the rental could be used to either pay completely for the assisted care or at least subsidize it.

Other landlord issues would, of course, need to be addressed, such as who will accept the rental payments and flow the money to the AL residence, upkeep of the property, and processing calls from tenants. All of these can be addressed by hiring a good property manager.

Finally, senior homeowners can also consider a reverse mortgage. This is a mortgage where a homeowner, in essence, receives payments from a lender each month for the equity in their home. As the owner receives payments each month, a loan balance begins to accumulate, which is eventually paid off when the house is sold.

Assisted living care may be in your future, but it doesn't have to be a source of worry if you carefully planning now.

For more articles by M. Anthony Carr, please press here.

Published: November 23, 2001

Use of this article without permission is a violation of federal copyright laws.

Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.