By Eric Berman, REALTOR®, SRES® | The Eric Berman Team at Compass
TL;DR:
Before anything about listing, one conversation should happen first: with an elder law attorney. A primary residence and the proceeds from selling it can be treated very differently for Medicaid eligibility purposes, and where long-term care coverage may be needed, the decision to sell — and when — carries consequences that a real estate conversation can't address. There's also a federal tax provision worth knowing: where an owner becomes physically or mentally incapable of self-care, time spent in a licensed care facility can count toward the residence requirement for the capital gains exclusion. Both belong with professionals before the house goes on the market.
The Conversation That Comes First
Most guidance on this subject starts with preparing the house. That's the wrong starting point when care is involved.
Where long-term care coverage may be needed now or later, the decision to sell has implications beyond the proceeds. For Medicaid eligibility purposes, a primary residence and cash from selling it can be treated differently — a home may be handled as an exempt asset in certain circumstances, subject to limits, while sale proceeds generally become a countable resource. Converting one into the other is a consequential step.
There's also a look-back period in New York for institutional long-term care Medicaid, during which transfers of assets are examined and can result in a penalty period affecting when coverage begins. And estate recovery — the state may seek recovery from the estate of a person who received certain Medicaid benefits.
None of that is a real estate question and this page is not the place to answer it. Rules change, eligibility depends on individual circumstances, and the difference between a well-timed decision and a poorly timed one can be substantial.
What matters practically: talk to an elder law attorney before listing. Not after an offer, not during the move, and not once the proceeds are already in a bank account. Families who have that conversation first have options. Families who have it afterward frequently do not.
For some households the answer is to sell. For others it's to hold the property, at least for a period. That's a genuine question with a real answer, and it comes from counsel rather than from an agent.
The Tax Provision Worth Knowing
This one is specific, favorable, and almost never mentioned.
The federal primary-residence exclusion — $250,000 for a single filer, $500,000 filing jointly — generally requires that the owner used the home as a principal residence for at least two of the five years before the sale.
There is a provision for owners who become physically or mentally incapable of self-care. Where that applies and the owner owned and used the home as a principal residence for at least one year of the five preceding the sale, time spent in a facility licensed to care for people in that condition can count toward the use requirement.
For a household selling after a period in care, that can be the difference between qualifying for the exclusion and not — and on a Long Island home held for decades, the exclusion is worth a great deal.
Whether it applies is a CPA question, and the surrounding facts matter. But it's worth raising, and most families don't know to ask.
The other tax item is the ordinary one: improvement records across the ownership period add to basis and reduce taxable gain. On a home held forty years those receipts can be worth six figures, and they're usually in a basement that's about to be cleared. The full treatment of how gain is calculated covers the mechanics. Find them before anything is discarded.
Who Has Authority to Sign
This determines whether a sale can proceed at all, and it's frequently discovered too late.
A power of attorney has to be adequate for a real estate conveyance. A general power of attorney may not suffice, and the buyer's title company has to accept it. Both are straightforward to arrange with lead time and difficult under a contract deadline.
Capacity matters and it's a legal question. Where an owner's capacity to execute documents is genuinely uncertain, that belongs with an attorney rather than being worked out within a family. Where capacity has already become an issue and no adequate power of attorney exists, a guardianship proceeding may be required — which takes time and should be understood early rather than discovered when a buyer is waiting.
Where property is held in a trust, the trustee's authority governs, and the full treatment of selling a home held in trust covers what that involves.
The practical step: establish who can sign, and confirm the documentation is adequate, before the property is listed.
Timing, and the Double Carry
Care arrangements and home sales run on different clocks, and the gap costs money.
A residence may need to be secured before the house sells. Deposits, first month's fees, and ongoing care costs begin when the move happens, not when the sale closes.
That produces a period of carrying both — care costs alongside mortgage, taxes, insurance, and utilities on an empty house. On Long Island that combination is substantial, and it's the financial pressure most families underestimate.
Three things reduce it.
Prepare the sale side early, even if listing waits. Permits checked with the governing building department, attorney engaged, disclosure form completed. A household that has done that can list quickly when the timing arrives.
Understand the vacancy question. Standard homeowner's policies may limit or exclude coverage on a property left unoccupied beyond a defined period. Call the carrier before the house is empty rather than after — this catches people, and a claim denied on a vacant house is a bad outcome on top of a hard year.
Be realistic about the timeline. From listing to closing, a Long Island sale typically runs longer than families expect once you count the one to two weeks between accepted offer and signed contracts, plus 45 to 60 days to closing for a financed buyer. The full three-segment timeline covers the arithmetic.
Clearing the House
This is the longest task and it's harder here than in an ordinary downsizing, because it usually happens under time pressure and often without the owner present.
Find the records first. Improvement receipts, permits, warranties, and closing documents from the original purchase — before anything is discarded. This is the single most valuable thing in the house that isn't furniture.
Then work outward from the easy categories. Paperwork, duplicates, the garage, the shed. Emotionally heavy material — photographs, correspondence, a spouse's belongings — should be handled separately and slowly, not in the same session.
Involve family early and specifically. A walkthrough where relatives mark what they'd want prevents both the assumption that someone wants the dining set and the accidental loss of something they did.
Senior move managers are a real service category specializing in exactly this work — sorting, donation, disposal, and coordinating the move. Worth pricing for a household facing decades of accumulation under a deadline.
And keep some of the house. Photographs of the rooms, the garden, the view from a particular window. That costs nothing and families are consistently glad to have it.
A Worked Example
Consider a composite case — a Nassau County family whose father was entering a care residence, with a home he'd owned since 1979.
The first call was to an elder law attorney rather than to an agent. That conversation changed the plan: given his circumstances and the possibility that long-term care coverage might be needed, the timing and structure of a sale mattered in ways nobody in the family had considered. The house eventually sold, and it sold on a schedule the attorney helped set.
Their CPA raised the incapacity provision, which turned out to apply, and preserved the exclusion.
His daughter spent a weekend in the basement before the clearing began and found forty years of improvement receipts. That work reduced the taxable gain substantially.
They called the insurance carrier before the house was empty and adjusted the policy. And they called the town building department, which surfaced a 2004 permit never closed out — seven weeks to resolve, and they had the time because they'd started early.
The listing conversation was the fifth one, not the first. That was the right order.
Where to Start
Talk to an elder law attorney before listing, and before making any decision about the property. Talk to a CPA about the exclusion and about whether the incapacity provision applies. Establish who has authority to sign and confirm the documentation is adequate for a conveyance. Call the insurance carrier about vacancy. Call the building department that governs the property. Find the improvement records before clearing anything.
Then, and only then, the real estate questions. A read on value is available through a quiet look at current figures, and the practical sequence for a move like this covers the order of operations in more detail.
The Honest Bottom Line
The real estate part of this is the straightforward part. The house will sell, and preparing it is the same work it would be under any other circumstances.
What deserves attention first is whether selling is the right move at all, and when — because where long-term care coverage may be involved, that question has consequences an agent cannot address and a family cannot easily undo. An elder law attorney can answer it in one conversation.
Families who have that conversation before listing have options. Families who have it after the proceeds are in the bank frequently have fewer.
Whenever the timing is right to talk through the property side, with no pressure either way, that conversation is available. But it should not be the first call.
This is general information, not legal, tax, or financial advice. Medicaid eligibility, exempt asset treatment, look-back periods, estate recovery, capacity, and tax provisions all turn on individual circumstances and change over time. Consult an elder law attorney, a CPA, and a licensed New York real estate attorney before making decisions about a property.
FAQs
Should I sell the house before applying for Medicaid?
That's an elder law question and it should be answered before anything is listed. A primary residence and the proceeds from selling it can be treated differently for Medicaid eligibility purposes — a home may be handled as an exempt asset in certain circumstances, subject to limits, while sale proceeds generally become a countable resource. New York also applies a look-back period for institutional long-term care Medicaid, and estate recovery may apply afterward. Rules change and eligibility depends on individual facts. Talk to an elder law attorney before listing rather than after.
Can I still claim the capital gains exclusion if I've been in a care facility?
Possibly, through a provision most families don't know about. The federal exclusion generally requires using the home as a principal residence for two of the five years before sale. Where an owner becomes physically or mentally incapable of self-care and owned and used the home as a principal residence for at least one of those five years, time spent in a facility licensed to care for people in that condition can count toward the use requirement. Whether it applies is a CPA question, and on a long-held Long Island home the exclusion is worth a great deal.
Who can sign if the homeowner can't?
Someone holding an adequate power of attorney — and adequacy matters. A general power of attorney may not suffice for a real estate conveyance, and the buyer's title company has to accept the document. Both are straightforward with lead time and difficult under a contract deadline. Where capacity is genuinely uncertain, that's a legal question rather than a family discussion. Where capacity has already become an issue and no adequate document exists, a guardianship proceeding may be required, which takes time.
What happens to insurance when the house is empty?
It's worth calling the carrier before the house is vacant rather than after. Standard homeowner's policies may limit or exclude coverage on a property left unoccupied beyond a defined period, and a claim denied on a vacant house is a poor outcome on top of a difficult year. Carriers generally offer vacancy endorsements or alternative coverage. This catches families who are focused on the move and not thinking about the empty property behind them.
How long will the sale take?
Longer than most families expect, because the timeline has three parts rather than two. Listing to accepted offer is variable and driven mostly by price. Accepted offer to signed contract runs one to two weeks in New York, since acceptance binds nobody until both attorneys negotiate and both parties sign. Signed contract to closing runs 45 to 60 days for a financed buyer. Meanwhile care costs and the vacant home's carrying costs run together, which is the financial pressure families most underestimate.
By Eric Berman, REALTOR®, SRES® | The Eric Berman Team at Compass
Eric Berman | Long Island & Queens Associate Broker | Compass
1468 Northern Blvd, Manhasset, NY 11030
(917) 225-8596 | eric@ericbermanre.com | theericbermanteam.com
