No. of Recommendations: 1
First, she probably will end up paying pretty substantial income taxes on that $500K. If she inherited the land not too long ago, her cost basis is its market value on the date she inherited it. That could substantially reduce her profits from the sale for tax purposes.

Second, a clever tax adviser might have been able to defer taxes on part of the income and hence keep taxes lower. But they are probably capital gains, and its not easy to do much better than that.

Skilled nursing home care costs about $6K/mo these days and most stay less than 36 mo. So she is looking at $216K liability.

Two ways to save that cost. One is to buy long term care insurance. It is likely to be costly, and because most people never collect anything from the policy (only abt 1/3 ever get a dime), I think it is not a very good investment. Your odds of getting your money back is 1/6. But the $216K gives you a reference point. Most who have the resources are better off to self insure. Then you pay the $216K (more or less) if you need to, or otherwise keep your funds.

The other way, is to give the $500K away down to some minimum and then allow the state to pay your costs of care under Medicaid. Usually the funds would be distributed to heirs, and I hear there is a 5 yr look back period. So you give the assets away, keeping enough to live on (with pension and Social Security) for 5 yr, and then enter a nursing home. Elder attorneys are the experts on this. They can work out a plan for you and guide you through the details. Of course govt is worried about the costs of large numbers of baby boomers doing this. They are heavily promoting Long Term Care insurance to avoid the costs.

As to the IRS, she is well below Federal Estate Tax minimums. So that is not a concern. But there may be state inheritance taxes to worry about. She may also want to worry about probate costs. They are low in some states; high in others. That is where a revokable living trust might help. At minimum she needs a will, a living will, and a durable power of attorney. Most attorneys can easily do the latter; some specialize in trusts, especially if she decides she needs one with special provisions.

For now, I would suggest she give attention to investing her $500K to maintain its buying power. Fooldom can provide more specific advice if you wish. Keep in mind she might be around for 20 or 30 more years. In that time inflation can be a major concern. That is why investment is important to maintain buying power.

I have to mention, I am not an expert on any of this. This should get your started, and hopefully the pros will be along soon to fill in additional details. You can find books in your library or book store on trusts and wills and what they can do for you.
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