Not a lawyer, but there is a way around it. First of all, there is a capital gains exemption, depending on how much it sells for and the cost basis (original cost+improvements). In terms of waiting until she dies,the mother could in theory gift up to 10k worth of value each year to the family members. So she could if she wanted gift it to kids, sil/dil, and grand kids, to disperse the value now. It is likely that the capitol gains might be under the exemption (it used to be like 500k or something for a couple) so I doubt that capitol gains or estate taxes would be a factor.
I would recommend getting it cleaned out and getting it on the market. It isnāt a great housing market right now because rates are high, but if you price it reasonably (where the market has been, or maybe a little lower) you may be able to sell it, especially if rates come down, relatively quickly. I am saying this for the same reason others have, just too many things go wrong, becomes an attractive nuisance or worse (people looking for copper to sell), freeze damage, water, etc.My only wish is whatever you decide, that everyone is on board with it:)
The annual gift limit exclusion for 2024 is $18,000, but even if somebody wanted to give more than $18,000, taxes are not due on the gift. The mother would simply need to fill out Form 709, and the gift amount would be deducted from her federal estate tax limit, which is currently $13.6 million.
Editing to say that I do not know which state the OPās mother lives in.
But I donāt think the mother was trying to disburse her money now, unless I missed something.
Coming back to say that I agree with others who say that cleaning out the house can be so therapeutic and heart-warming.
Iām not a materialistic person. At all. But when cleaning out the house I came across some things that I had long overlooked or forgotten about that I love having in my house now. Very little of actual value but things that meant something to me. The Dallas Cowboys flag that she flew every game day that I now fly on game days. Some of those giant colored glass midcentury-modern grapes everyone used to have. The bookcase that housed my beloved Encyclopedia Britannica. That was the last thing we brought home. Dh stained it black, and Iām looking at it right now in my bedroom.
Iām also the only one who uses the house to sleep as Iām the only one out of town. We left the primary suite with a bed and dresser for staging but also so dh and I would have a place to sleep.
Just a thoughtā¦you mention @greenbutton that no one needs the $$$ right now. What a living gift it could be for your mom - or the family as a whole - to look at this as an opportunity to do good with the house.
In addition to having the opportunity with your mom alive to get her input, hear the stories of certain items - most of us agree who were not able to do that - that it can be pricelessā¦but also:
Donate furniture to a needy family - a single mom starting out, a family that had a house fire, a local non-profit who helps people who are starting over. You wonāt have to worry about selling it and they may take A LOT at once.
Anything you make $$ off - whether items in the house, a car, the houseā¦pick a couple of charities close to your parentās or your familyās heart - smaller non-profits can truly be changed by a gift of even just several thousand dollars.
It might be really special to do this while your mom is alive and can feel good about what she and your dad built and KNOW that it helped others.
Last year we sold the home we raised our daughter in and had owned for 35 years. The first potential buyer who looked at the house was a couple with a baby. Just seeing that a young family would be able to raise their family there made me feel so different about selling the house. It served us well, and it was time to pass the torch and have it serve somebody else well!
We recently sold my parentsā house to my niece after both folks had died. It was unoccupied for several years and my brother had his contractors do some updating but it did still need quite a bit of work. The bonus of having waited is that the basis was stepped up so no capital gains on the sale.
My brother wanted to hang onto the house for the huge capital gains to be avoided and because he thought mom might want to move back there (after she was already in CCRC) and have a caregiver. Mom had NO interest and I am relieved she stayed at her CCRC where she needed increased level of care up to skilled nursing prior to her death.
I sold my folks house a couple of years back after my dad passed. This was the house we grew up in. Found a buyer who was renting in the neighborhood, with two kids both in the elementary school that me and my sibs attended. Sold.
Just knew that our parents woudl have appreciated that a young family was coming in.
Another friend waited until after her parents death and then one of the kids and grandkids (son and grandD of the owners) bought house and are paying off the other subs. They are happy to have avoided huge capital gains but its a HUGE mortgage.
I think it depends on where you live. In Hawaii or parts of Ca the stepped up basis makes a huge difference. If a home was purchased in the 60ās the capital gains could be a few million.
I believe the increased value will be calculated as the value at the time your father died in 2023 and your mother inherited the house until the time your mother sells the house.
My father and mother co-owned a house. It had appreciated significantly in value since they inherited it from my grandmother many years before. My father sold the house a short time after her death (under 2 years). The cost basis for tax purposes was the value at the time of her death. Which ended up meaning he paid no taxes on the sale.
I explained how the step up basis is handled in a response up thread yesterday.
What you have described is how the step up basis is handled when the final owner - if you will - dies. When the first spouse dies in non-community property state, half of the basis is stepped up to the value at the date of death of the first spouse. The surviving spouseās basis remains the original purchase price. However if the house is sold within two years of the first spouseās death, the surviving spouse can claim the married capital gains exemption of $500,000.
In addition to the above, capital expenditures and selling costs (RE agent commission) are added to the basis before calculating capital gains.
I still stand by the need to check tax consequences in your individual situation. I drive by a house daily where they kept it empty after she moved into assisted living. When she died they put it on the market. Through public records she paid 36,000 for the house, it sold for 2.8 million. The tax savings for her family is think weāre worth the cost of upkeep for a few years.
Thanks, my point was that we already know the co-owner died in 2023, so many of the tax suggestions people are posting do not apply. (In my example it was NY - we donāt know the ownership state of the OP).
Think of it this way. When you sell it, the new owner is going to renovate it, and itāll be a house for another generation of memoriesā¦complete with waffles! Thatās what I love about older houses. Thereās always a story.
