Search Articles

Find Attorneys

How Should I Navigate the Sale of Dad’s Home?

  • May 6th, 2025
Q
My sister and I, along with two other people we hired, provide care and help for our 95-year-old father, who remains in his home. It's getting to the point that we will move him into my house, and we would like to sell his house. What is the best strategy to sell the house from a tax perspective? Should Dad gift the house to my sister and me, and then we, in turn, sell the house? We are in Dad’s will and trust to receive the house and financial assets upon his death. What is the best course of action from a financial/tax perspective?
A

When facing the decision to sell a parent's home, especially when considering inheritance and caregiving, it's important to understand the tax and financial implications. Here are some key factors and strategies to consider:

Understanding the Situation

You're currently caring for your 95-year-old father in his home. As you prepare to move him into your house and sell his property, you're exploring the best way to handle the sale from a tax perspective. You've also mentioned that you and your sister are named in your father's will and trust to receive the house and financial assets upon his death.

Key Considerations

  • Gift vs. Inheritance vs. Selling: Gifting the house to you and your sister before the sale versus inheriting it upon your father's death versus selling it has significant tax implications.
  • Capital Gains Tax: Understanding capital gains tax, which is the tax on the profit from the sale of an asset, is crucial.
  • Cost Basis: The cost basis of the property, which is generally what your father paid for it, plus any improvements, plays a key role in calculating capital gains.
  • Stepped-Up Basis: When you inherit a property, the cost basis is typically "stepped up" to the fair market value at the time of your father's death, which can significantly reduce or eliminate capital gains tax if you sell shortly after.

Potential Strategies

Gifting the House

  • Pros: Potentially reduces your father's estate size.
  • Cons: You would inherit your father's cost basis. If the property has appreciated significantly, you could face substantial capital gains tax when you sell.

Inheriting the House

  • Pros: Stepped-up basis to fair market value at the time of inheritance, potentially minimizing or eliminating capital gains tax.
  • Cons: The property remains part of your father's estate until his death.

Selling the House

  • The Section 121 capital gains exclusion is $250,000 for a single person. If the property has appreciated beyond that amount, then leaving it until your father’s death – and getting a step-up in basis – may be the most tax-advantageous.

Recommended Course of Action

It is highly recommended to consult with a qualified estate planning attorney and a tax advisor or certified public accountant (CPA). They can provide personalized advice based on your specific situation, including:

  • Detailed Tax Planning: Calculate potential capital gains tax under different scenarios.
  • Estate Planning Review: Ensure your father's will and trust are up-to-date and reflect his wishes.
  • Property Valuation: Obtain a professional appraisal to establish fair market value.

Frequently Asked Questions (FAQ)

What is capital gains tax?

Capital gains tax is a tax on the profit from the sale of an asset, such as a house.

What is a stepped-up basis?

A stepped-up basis is the fair market value of an asset at the time of someone's death, which becomes the new cost basis for the inheritor. The cost basis is adjusted from what the asset was valued at when the owner originally purchased it to its fair marked value on the date they died, so it could be lower or higher, but is more often the latter.

Should I gift the house or inherit it?

This depends on your specific situation. Consulting with a tax advisor and estate planning attorney is essential.

Key Takeaways

  • Inheriting the house often provides a tax advantage due to the stepped-up basis.
  • Gifting the house may lead to higher capital gains tax.
  • Professional advice from an estate planning attorney and tax advisor is crucial.

Disclaimer

This response is for informational purposes only and does not constitute legal or financial advice. It is essential to consult with qualified professionals for personalized guidance.

Local Elder Law Attorneys in Your City

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State

Elder Law Attorney

Firm Name
City, State


Last Modified: 05/06/2025
Medicaid 101
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
What Medicaid Covers

In addition to nursing home care, Medicaid may cover home care and some care in an assisted living facility. Coverage in your state may depend on waivers of federal rules.

READ MORE
How to Qualify for Medicaid

To be eligible for Medicaid long-term care, recipients must have limited incomes and no more than $2,000 (in most states). Special rules apply for the home and other assets.

READ MORE
Medicaid’s Protections for Spouses

Spouses of Medicaid nursing home residents have special protections to keep them from becoming impoverished.

READ MORE
Medicaid Planning Strategies

Careful planning for potentially devastating long-term care costs can help protect your estate, whether for your spouse or for your children.

READ MORE
Estate Recovery: Can Medicaid Take My House After I’m Gone?

If steps aren't taken to protect the Medicaid recipient's house from the state’s attempts to recover benefits paid, the house may need to be sold.

READ MORE
Help Qualifying and Paying for Medicaid, Or Avoiding Nursing Home Care

There are ways to handle excess income or assets and still qualify for Medicaid long-term care, and programs that deliver care at home rather than in a nursing home.

READ MORE
Are Adult Children Responsible for Their Parents’ Care?

Most states have laws on the books making adult children responsible if their parents can't afford to take care of themselves.

READ MORE
Applying for Medicaid

Applying for Medicaid is a highly technical and complex process, and bad advice can actually make it more difficult to qualify for benefits.

READ MORE
Alternatives to Medicaid

Medicare's coverage of nursing home care is quite limited. For those who can afford it and who can qualify for coverage, long-term care insurance is the best alternative to Medicaid.

READ MORE
ElderLaw 101
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Estate Planning

Distinguish the key concepts in estate planning, including the will, the trust, probate, the power of attorney, and how to avoid estate taxes.

READ MORE
Grandchildren

Learn about grandparents’ visitation rights and how to avoid tax and public benefit issues when making gifts to grandchildren.

READ MORE
Guardianship/Conservatorship

Understand when and how a court appoints a guardian or conservator for an adult who becomes incapacitated, and how to avoid guardianship.

READ MORE
Health Care Decisions

We need to plan for the possibility that we will become unable to make our own medical decisions. This may take the form of a health care proxy, a medical directive, a living will, or a combination of these.

READ MORE
Long-Term Care Insurance

Understand the ins and outs of insurance to cover the high cost of nursing home care, including when to buy it, how much to buy, and which spouse should get the coverage.

READ MORE
Medicare

Learn who qualifies for Medicare, what the program covers, all about Medicare Advantage, and how to supplement Medicare’s coverage.

READ MORE
Retirement Planning

We explain the five phases of retirement planning, the difference between a 401(k) and an IRA, types of investments, asset diversification, the required minimum distribution rules, and more.

READ MORE
Senior Living

Find out how to choose a nursing home or assisted living facility, when to fight a discharge, the rights of nursing home residents, all about reverse mortgages, and more.

READ MORE
Social Security

Get a solid grounding in Social Security, including who is eligible, how to apply, spousal benefits, the taxation of benefits, how work affects payments, and SSDI and SSI.

READ MORE
Special Needs Planning

Learn how a special needs trust can preserve assets for a person with disabilities without jeopardizing Medicaid and SSI, and how to plan for when caregivers are gone.

READ MORE
Veterans Benefits

Explore benefits for older veterans, including the VA’s disability pension benefit, aid and attendance, and long-term care coverage for veterans and surviving spouses.

READ MORE