My dad is 94 and many of you have seen his 'progression' here in this forum. Since covid started, he has had to move from assisted living to skilled nursing due to a downturn in his health. We have tried to get him to 2 different memory care facilities but was turned down by both because of his continuing medical needs. His dementia is worsening and he is unable to walk anymore -- he is confined to a wheelchair. He has not been in his house for over a year. It sits like it did since the day he went to the hospital a year ago in September, and was not able to return home. As guardian, I am responsible for keeping it maintained, although I haven't really done much except hire a yard service to maintain the yard. All his stuff is still there and there is no chance he will be able to move home. He is on self-pay at skilled nursing and has enough funds to last a while. I still pay all utilities on it plus property taxes and yard care. The house itself is paid for. I am very afraid of something happening to it. It is an old house. It sits back in the woods in a grove of very large fir trees. In talking to my guardianship attorney this week, she suggested looking into selling it. We are concerned about what the 'basis' might be, however, and if it is going to be too large a tax bill, we might hang on to it. My dad still asks to move home which can't happen. To sell his house would send him into a spiral and because of the guardianship, he will receive copies of all legal papers. This may be more than I can do emotionally and I'm just not sure what to do.
I definitely would not make a decision on sale until you have financial advice either from an estate planning, real estate, or elder law attorney. You might explore this scenario:
I believe his interest in the house vested in his name when he was added to the deed - however, I'm not sure b/c it would depend on how the deed was titled. So, assuming they owned the house jointly, she died and: HOW was the deed "changed" to his name? This could be a major factor on determining the date in which his interest in the house began to accrue.
I would have thought that his interest was stepped up to full ownership on his wife's death. When he himself passes, his own interest is stepped up to the value of the house at that time, but this should be verified, especially given the fact that he held title with his wife jointly before she passed.
As to the basis calculation, I learned when my father died that now an appraisal is required by the IRS w/i a certain time to establish a basis on the date of his death. I would raise that issue with the attorney. I don't recall what the time period was for getting an appraisal. (A trust accountant told me this.)
As for keeping the house and holding it until he passes to capture the step-up advantage, have you considered renting it? It would draw income and you could use that to offset the costs, while still preserving the house.
If the house is held in trust though, the rental income would be taxed at a different rate from a house not held in trust.
Another factor of keeping it empty is the cost of vacant house insurance. It's a little over $2K annually for my father's house, but vacant house insurance is limited and does NOT cover for water damage (at least the policy I have doesn't). And there are only a few companies that insure vacant houses, per my insurance agent.
If you decide to keep it and not rent it out, I would seriously consider having the water shut off for the winter. If the pipes burst and there's a flood, the damage would NOT be covered under a vacant house policy, and you'd be facing some serious financial expenses.
You must own and occupy the home as your principal residence for at least two years before you sell it. To qualify for the home sale exclusion, you don’t have to be living in the house at the time you sell it. Your two years of ownership and use may occur anytime during the five years before the date of the sale. This means, for example, that you can move out of the house for up to three years and still qualify for the exclusion.
You say your dad left the house only a year ago and that there's no way he'll be going back. In that case, the sale would qualify for the $250K tax exemption. The remainder of the capital gain would be taxed as a long term gain at 0,15 or 20%. To me it's a no brainer. You'll keep the first 250K along with 80% of the remaining profit. If you keep that property longer than 3 yrs from the time he left, your give up the 250K exemption.
My worry here is insurance. Are they keeping the insurance policy going knowing it is unoccupied. We were informed this would be a problem on my brother's place after a year. They very much dislike unoccupied.
I especially agree with cleaning it out, and I wouldn't talk with your Dad a whole lot about that. I don't think he could even retain it if you did? And it would be upsetting for him to hear given he still thinks he could return home.
Wishing you the best of luck.
Why not do this. Start cleaning out and sell what you can. Once you get that done, maybe things will have worsened with Dad and papers concerning a sale of the house he won't understand anyway. Insurance on an empty house is very high. You can get timers for lights to come on at a certain time and go off at a certain time. I unplugged all appliances to cut down in the electricity used. I put the heater at 55. This will keep pipes from freezing.
My in-laws didn't have as much as what your dad probably has but it still took us a long time to sort through what they had. In the end we held a "name your price" garage sale so that nothing needed to be marked. We put up a sign letting people know the proceeds were going to pay the NH expenses of my MIL. People were very generous.
Get a lot of large, clear tubs so you can group logical things together that you remove. You don't have to decide right then and there if you're keeping things, you can remove them and go through them later (if you have a place off site to store it, or at your own home). I agree with Marcia that even after being notified of a sale he probably won't remember for long. The finality of this can be emotionally draining for family. I wish you peace in your heart.
I would put it on the market. If the tax bill is too high and selling right now isn't a good idea, how about a rent to own situation? First time buyers are having a tough time competing in this very competitive realty market. You could find someone to take the carrying costs off your hands and treat the place as their own.
It depends on where your dad is on this journey. When we got rid of the car, we had a couple days of upset and then he forgot we did it. Maybe the guardian can send him all the paperwork at once so it isn't a constant stream of reminders?