I am a successor trustee for my mother who has been deemed incapacitated by two doctors. She understands a lot still and remains fairly articulate but she is definitely unable to manage her affairs. I am also her power of attorney. Her power of attorney document gives me the power to sell her property and many other powers. My mother is currently living with me as she is currently unable to live in her home—due to Covid, needing help w/ daily care, and her property being too much for her to take care of. I want to know what might be involved legally and financially and tax consequence wise in downsizing her current home? Currently another family member is living in her home (as they were when she was there) and they would move out upon sale. I know I will need to talk to professionals to understand more about this, and I do have a lawyer helping me in my role as successor trustee. That said, I am interested in other peoples experience and understanding of the pertinent financial issues.
What if we sell her home, which is currently considered her primary residence and buy a residence at a lower price that is closer to me since I am her caregiver, medical POA etc? Because she needs assistance with daily living, and because I have been doing this since Covid began, I am also thinking that we may move her temporarily to a board and care near our home. This would allow me to sell her current home and buy one closer to us and be able to invest the time in doing that because I think it will be too difficult to do that while caring for her in my home (not to mention we have 3 kids, etc). The second home would be intended for her to live in and we would hope that she would be able to do so with a live-in or paid caregiver. Because the home is intended as her residence, would we still be able to have her carry over her current property tax basis to the new home? We are in California. Also, if we buy a home that is less expensive than her current home, and we put the—lets say—$100,000-$200,000 difference in the bank, will there be taxes on this money in someway since it will not be invested in the new property? I am hoping that we could maximize our ability to use this to her benefit rather than losing it in taxes. Also, what would happen if we downsize in this way on her behalf, and then she later cannot live in the new smaller residence due to her health? Would she somehow be vulnerable to loosing the property tax basis that she carried over? (She bought her current home in the 70s, so its worth over 10 times more now). Lastly, if she needed to move from the new home, or if she never even got to live there at all because her health declined, and we then rented out the new downsized property (rather than it ever becoming her residence), would there be any financial consequences to doing that other than the obvious ones involved with renting a property? (Any tax consequences). I can’t recall what the capital gains limit is for a single individual, maybe $230,000 in California. So, for that hypothetical chunk of money that could be left over based on the difference between the selling price of her current home and the purchase price of the downsized home, I am guessing that would be subject to capital gains? (But exempt if less than $230K) This downsizing would also benefit my mother because she currently has about 100 K still left on her mortgage (1K monthly payment) and if we downsize we could get rid of that and she would have no mortgage.
Just want to reality test this idea and see what others think the financial considerations would be.
Thanks for reading.