Seniors who are are considering a move to a senior living community need to establish or review an estate plan so they understand the financial implications of their choices for themselves and their families.

“According to the National Association of Estate Planners and Councils, in 2011 over 120 million seniors didn’t have an estate plan in place when a life-changing event occurred,” says Dan White, a certified financial planner and president of Dan White & Associates in Glen Mills, PA. “It’s so important for seniors to get their affairs in order before they move onto the next chapter of their life. It’s imperative that the family be involved in the process.”

When changing your residence, review your will, power of attorney and health care proxy. Also, make sure your beneficiaries are in order on all accounts and policies.

At this stage in your life, it makes sense to discuss with your adult offspring or other family members how to handle finances if you should become incapacitated.

Independent Living vs. Assisted Living

Pat Simasko, founder of Simasko Law in Mt. Clemens, MI, says that seniors who choose to move into an independent living facility typically assume it will become their permanent residence, so they sell their home.

However, when seniors enter an assisted living facility, he notes, they generally feel it will be a temporary arrangement.

“When seniors move to an assisted living facility, they are required by law to let their homeowner’s insurance company know if the home will be vacant for certain period,” says Simasko. “If they don’t let the insurance company know–and something catastrophic happens to the house–there’s a good chance that they won’t receive a payment. So many people walk through my door and say, ‘I thought I’d only be at the assisted living facility for a few weeks. Why would it matter?'”

In addition to potential insurance problems, Simasko warns that seniors could face a hefty property tax bill if they don’t disclose their change in residence.

“There’s a huge difference in what a resident will pay for claiming a ‘principal residence exemption’ or not,” says Simasko. “Cities across the country are becoming extremely diligent about enforcing these laws.”

Selling a House to Pay for Senior Home, or Not

Choosing the optimal time to sell your home depends not only on market conditions but also your expectations for the future.

“At the end of the day, if selling the house is going to help the senior pay for living expenses, then they should sell it,” Simasko says.

However, he adds that seniors who are in poor health and anticipate a move into a nursing home should carefully consider that nursing homes require residents to use all of their available assets to pay for care–including the profit from the sale of a home (Medicare kicks in after the assets are spent).

In the case of a potential move into a nursing home, Simasko advises the heirs to hold onto the house themselves to exempt it from being used to pay for the nursing home.

Meanwhile, White suggests the family move their parent into senior housing before they put the house on the market, emphasizing the stress of living in a home while it’s being shown to potential buyers.

“That’s a lot of transition at one time for one person, especially if a lot of memories were created in the home,” White says.

A real estate agent, especially a REALTOR(r) who specializes in senior issues, can help you evaluate local market conditions, but an estate planning expert should be consulted to determine whether selling your home is optimal for you and your heirs.