@rosered55 – that link above is very helpful! Thank you. (I just learned that I cannot click LIKE and HELPFUL on the same post.)
So, my understanding is correct and she will still owe capital gains taxes on her half of the house and any appreciation above the value at the date of my father’s death on his half, but she still can still use her $250K exemption to offset some of the total gains.
CT, don’t forget that you can add the costs of improvements to the cost basis and that will offset the capital gains - new roof, new HVAC, new windows, additions, renovated BSs, etc.
CT1417,
In some states the basis goes to full market value…not half market value.
I have lived through the “aging parents who refused to do maintenance on their home”. Fortunately it worked out for us.
This is what happened. My siblings and I were aware that their ‘frugality’ was leading to safety concerns. Ironically, they didn’t want to repair stairs like other have said on this thread. They kept saying that the next owner could/would want to make changes to the house when they sold it, so why put the money into it. There was no reasoning with them as they were in their 70s and felt they knew better. Yes, houses in their area were being sold as tear-downs because of their great location, but they refused to see how postponing relatively small issues could escalate to large problems.
Fast forward a few years…So we were a little sneaky. As a couple of older relatives had falls which led to a real decline in mobility, we took them to visit 4 different senior living places over a Christmas visit with my out-to-town sibling.
It was not calculated. It evolved quickly over a couple of days. We appealed to the soundness of having an emergency plan if something bad happened…that was the sneaky part. Because although it was true, we did have an ulterior motive. We could not see them being able to safely stay in their house and we needed to introduce them to the idea of senior housing. They had negative, pre-conceived ideas of nursing homes. Fortunately they were pleasantly surprised with what they saw…a first step.
Yet they resisted the idea, because they thought they didn’t have enough money. That’s when we stepped in. My husband said he would help them get their financial house in order. He showed them that they had more than enough…their monthly draw down from their nest egg was pretty small. We told them none of us expected an inheritance…that we were all in good shape financially and that they should use their money to make their life comfortable. This was a huge second step.
To make this already long story shorter, we got smart in two areas…senior living and what my parents valued. When it came time for them to make the change (my father was beginning to have balance and strength issues), we guided them through the process. I admit both were not happy, prior to and during the move. They kept saying to people, we’ve been shanghaied.
But guess what. In very little time they came to love it there. Seriously, it’s like a cruise ship. There are lovely common areas, activities, movies, meals without shopping and cooking, and weekly housekeeping! I think my Dad who was the more vocal and unhappy of the two, changed his mind and embraced living there in just a couple of days. The food was a big part of it, because I believe my mom had gotten tired of preparing meals. Now he could have soup, salad, an entree and sides, and (the most important part for my Dad) dessert!! My mom took a little longer because she at first resisted being around old people. But as she made friends and dining companions, she loved it too. In fact it’s been 4 years and in hindsight she would say it’s fantastic! She is so grateful to be living there. My Dad passed a few months ago and she can’t imagine how she would have managed…they had been married almost 60 yrs.
As the daughter, I have to say that the support we received from the staff through the 3 months when my Dad was ailing was significant. I will be eternally grateful for both their assistance and kindness. Having a community, rather than being isolated in their house, has been a blessing.
My in laws house was in great shape but still… stairs. They put in one of those elevator things but like of machinery it had issues. Finally as my father in laws health deteriorated they grudgingly agreed to move to senior housing. They like many older people were convinced it was so much better to stay in their house and " age in place". My mother in law cried the whole way there the day we moved them in. She kept saying " I can’t believe we have to live in this place"
Flash forward 2 weeks later when we come to visit them. My father in law is at the doctors office getting a weekly blood draw. Before this the dr visit entailed a multi hour outing. Now the dr was off the lobby. 15 minutes later he joined my mother in law at the pool with their friends where lunch was being served. My mother in law turned to me as the pool attendant filled her lemonade glass and the folk music band played and said “Can you believe we GET to live in this place!”
CT1417- what state does she live in?
IF she is in one of the states, like Calif, where community property laws are in effect then the property stepped up value covers her gain as well as his gain.
(Note that the step-up in basis rules are different and can be even more advantageous to the surviving spouse in the 9 states that follow community property rules – check with your tax advisor.
There are certified professional organizers that are good at helping people get rid of clutter. Our local one explained how one visual technique they use is grouping all the same items together - so say the person is hung up on having a lot of Windex, and has like 10 bottles. Putting them all together, helps chip away at ‘needing them all’.
My two SILs helped at my in-law’s place. MIL could no longer go up and down the basement steps to the large freezer. Pretty easy to clear out the freezer of very dated items.
@menloparkmom – thanks! She is in NY, which I do not think is a community property state?
She will have capital gains tax to pay as she has been in house more than 40 years so even with my father’s step up basis and her $250K exemption, tax will be due.
Now here’s a random question: if she dies owning the house, does the basis step up again to the value at the date of her death? (Not that I am looking for her to die…want her to live comfortably in her house for as long as possible.)
I don’t have a tax advisor, but probably should!
Love the assisted living stories above. We have not found a reasonably priced option in the NYC metro area. Everything is expensive around here and there’s no land.
CT, yes the step up of an inherited property is the fair market value at time of death, but if selling, to get the exemption, the seller must have been a resident of the home for 2 of the 5 years preceding the sale.
OK…here is a question for you all. When SS recalculatea for,things like COLA…do they do so in your current deposited benefit…or your original benefit?
Right now…I’m getting 10 cents a month deposited into my account…the remaining $170 goes to pay my Medicare bill.
Just curious.
I am not sure about SS, but CSRS, gets COLA applied to the current benefit before allocations. Your Medicare bill is an allocation.
@mominva – thanks! I figured there had to be a catch. Good to know and I should have realized that.
Oh…my…God!!! I just have to relay this story, in case anyone here does not want to spend their money in retirement to make their home safe.
A couple of days ago, I went over to my parent’s house to help my Dad down the steps, as he had a very important doctors appointment. He is very unstable when he tries to walk, though I think much of it is mental. He wanted to go down the steps to the car in this way: Get a ladder. He sticks his head in the middle of it, and me and my mother are on the front and the back of the ladder (all our heads sticking in it), and he holds on to the ladder for stability as we walk down the stairs. Uh…no. Stupid, not willing to do it. Does he not remember there is a slope to deal with, this is not level.
Going down those stairs (in another way) was ridiculous. I’m talking just a few stairs. Panic, fear, my Mom crying, and pleading, “Don’t fall, don’t fall, don’t fall.” My dad in fear and panic, shaking. Me telling him to just lean on me, I’m strong, I have you. If you have to, go down on your butt. We got down the first flight, and by the next flight, thank GOD, some guys working on the house across the street heard the cacophony and rushed over to help. My dad let them assist him down the next set of stairs. Wouldn’t allow me and my Mom to assist him down, but he allowed them.
Came home, agreed to let a handyman build a railing for him. Today, changed his freaking mind, because he didn’t want to pay the money!! Thought he could do the stupid ladder thing (that we refuse to do) every time he needed to leave the house. I managed to not scream at him, and think I talked him into not changing his mind. Maybe you think you can do this today, what about tomorrow? It is city code that you must have a railing with stairs, you could get sued if someone slips. What if Mom slips, she’s in her seventies? He is one accident away from a nursing home or a hospital, think what that costs.
I think I definitely talked him into it. I hope. He said he is certain, and thanked me. But what about tomorrow? Will he forget? What is your money for in retirement, if not to make yourself healthy and safe? If anyone on here is thinking about whether they should safety/elder proof their house, do it now before you go freaking crazy! 
Oh dear! I’m so sorry you are dealing with this , but it sure sounds like the time has finally come when your parents or at least your Dad MUST be moved into a single level retirement home. -for both their sakes. He is not remembering what he had agreed to and you will be dealing with this lack of short term memory- agreeing and then forgetting aka “Ground Hog Days”- over and over and over again.
Your Dad is an accident waiting to happen - at his age a slip or fall down the stairs will probably break his pelvis.
So for BOTH your parents sake get a neuro evaluation of him done as soon as possible and find a place where he can safely live. He will kick like a bronco, but this time, you need to be the adult in the room.
Oh, menloparkmom, you have NO idea how stubborn my father is! He will not go anywhere. My mom has been screaming about this house for decades, and the reality is, he really can safely live there if they make the house elder friendly. She waits on him hand and foot, probably far more than anyone else would. I will see if he sticks to his word. Will he remember tomorrow? All that matters is if he doesn’t cause a fuss when the handyman comes over, and since he can barely move very far, I think it just might happen. We’ll see.
My mom keeps talking about moving, and I tell her that this is too far a leap. Start out with what will keep him safe today and tomorrow. He lives completely on one level. They bought this tiny house over 50 years ago, and he dug a basement, added two stories and expanded it on all sides. This is his love, his project. He will die in this house. Hopefully not today or tomorrow! I’ve never seen him completely capitulate, and I’ll give him the benefit of the doubt. For now.
It’s scary when loved ones live in dangerous situations. My MIL and FIL lived in a house 66 steps up from the street. It was work visiting them, especially with an infant and toddler.
My MIL was on dialysis, and it was hard in her dragging herself up and down all those steps. After she died, my FIL moved to SF to be with SisIL. He later wanted to move back into that house alone and I begged SIL and him not to have him do so, so he stayed in SF. There was no way to make it a safe place for an elderly person and we had stressed about them living there for a long time.
@Busdriver11, I hope your dad will allow his place to be made safer. It really is challenging, trying to help our elders stay as safe as possible.
Oh,I’m so,so sorry Busdriver. I could see my Dad having had that same idea. Just so insanely dangerous but logical in his mind. I like your thinking though. Make it all about your mom and how horrible it would be if she fell.
What are the odds of you hiring someone to do it and your Dad allowing it?
Is there any possibility of them living on the ground level in the future? Is there a bathroom with a shower, a room that can be a bedroom and possible washer/dryer space?
My dad, god love him, was stubborn, argumentative, hard headed and fiercely independent. And that was on a good day. Yikes.
I’m sorry you are dealing with this. I have a 96 yo grandmother who insists on living independently even though she is going blind and deaf. She lives in a rowhouse with a steep flight of stairs and then a concrete front stoop with more steps. And refuses to get a cell phone or one of those emergency push button things you can wear around your neck. Her only family is my mother, sister and me and we live 1000 miles away and she doesn’t want us to help her. We’ve set up to have a helper come in and she refuses that. I hate to say it but she’s going to take a tumble one day and that will be that. So stubborn.
Sometimes a person who didn’t grow up in the family can talk some sense into our parents.
My grandfather, was legendarily stubborn, and refused to move out of my grandparents’ little rowhouse that they lived in forever, even as it turned into a slum around them. Their kids (my mother and two uncles) tried for years to get them out of there. Even after being robbed several times and mugged, my grandfather wouldn’t move.
Finally my father (the SIL) basically said “that’s it you’re moving” and to the surprise of everyone, they agreed.
When you remove some of the family baggage from the equation, they may be more amenable to reason.
You know, if it was me I’d schedule a guy to come in and put up railings on any stairs (both sides!) and pay for it myself (regardless of whether my parents could afford it or not) and tell them it is a gift from me because I love them and want them to be healthy and to maintain their independence as long as possible. I’d let the chips fall where they may realizing that any fallout would probably be short term in nature. I bet once the railings are there they’ll quickly realize how useful and practical they are. Most folks won’t make a huge fuss in front of strangers as evidenced by @busdriver11’s father willing to let the men help him but not his own wife and daughter. If I thought there was going to be a big fuss, I’d arrange an excuse to get them out of the house while the work was being done.
Better to suffer a few hours or days of a snit than see something tragic happen.