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House maintenance would be from Mother's finances. You as POA could make that decision, whether to repair or not, rent or not, sell it or not...only you.
If it was my kettle of fish, I just sell the house right now as is. Get an appraisal. Offer it at appraisal to all siblings, if none wants to purchase it....list it with a realtor. If more than one sibling wants to buy it for appraised value, you will need auction it off between them.
Put all money from house sale into Mother's bank account. You could as POA buy stock with it or leave it sit, your choice.
I would not get into the potential disaster from let's rent out Mom's house. Mom is not going back to her house,so no reason to save it for her.
This is what we did. We put the proceeds from the sale of her condo into a CD ladder for her.
Now, you would choose a different instrument for savings.
You don't need the headache of renting and managing your mom's health and finances.
No, no, no, don't let your siblings rent it out. You don't want to turn into one of those families where a down-on-their-luck family member decides to move into Mom's house to live there free and it takes years to evict him/her after Mom passes on. Sadly, this is all too common.
Ugh. Living with this scenario now. My sibling is living in Moms house. It used to be neat as a pin and is now trashed.
I had to demolish my dad's house several years ago. You don't want to rent out a house. If it's in some state of disrepair, it'll only attract low-price tenants who will only add more wear-and-tear. When it becomes vacant, more problems arise. I had to chase off an illegal immigrant who tried to squat there. Just fix it and sell it as soon as possible.
No family members would live there and there is no emotional ties to the house. I also have durable POA.
What about capital gains tax? I thought I had to wait till my mom passes to prevent these taxes. That house is paid off and worth around $900K in So California.
I am aware that a real estate attorney/elder attorney would have these answers but wanted to know if anyone else has had or is in the same situation.
Thank you everyone for your input!
Agree with Geoff on checking with CPA.
I believe you're correct that in general waiting until your mom has passed would avoid the most in capital gain taxes. (Because it would step-up in value at that time).
Of course by going "Rental" you'll need to declare rental income, etc.. (just fyi from a tax perspective).
But still, that's not terrible, just make sure you use an accountant. And use mom's funds to pay for those accountants. (These are mom's expenses, you're just the agent carrying them out - you're not liable for them).
As far as your original question - yes you can use mom's finances to fix up mom's house. It sounds like she is financially paying for her own memory care, so you shouldn't be in any sort of "medicaid" issue. (that's where use of finances get's tricky). Keep in mind that should she live long enough to spend down and eventually need to go on medicaid, at that time the house may need to be sold first and the proceeds used on her care. But if she can stay private pay until the end, the house will be her estate's to disburse according to her will/trust/wishes. So there's nothing to prevent renting it in the meantime.
She is going to get hit with capital gains taxes one way or the other. He is holding stocks to pay for her expenses. She has access to the $250,000 capital gains exclusion on the sale of the property if she has lived there two of the last five years. This may not be available if she is institutionalized for a long time. The step-up of the cost basis is available for all assets in the estate.
I assume the federal estate tax exemption of 4.5 million dollars is not a consideration here. If it is, the value of the house may be subject to the tax.
Without estimating how long she'll be institutionalized, it's difficult to tell which way to go here. It sounds like it's only been recent and decisions are starting to be made now that the house has been vacated.
She is going to get hit with capital gains taxes one way or the other. He is holding stocks to pay for her expenses. She has access to the $250,000 capital gains exclusion on the sale of the property if she has lived there two of the last five years. This may not be available if she is institutionalized for a long time. The step-up of the cost basis is available for all assets in the estate.
I assume the federal estate tax exemption of 4.5 million dollars is not a consideration here. If it is, the value of the house may be subject to the tax.
Without estimating how long she'll be institutionalized, it's difficult to tell which way to go here. It sounds like it's only been recent and decisions are starting to be made now that the house has been vacated.
Yes, we placed mom in May and all these factors/ideas are now in the works.
Thank you Ichoro for your explanation on capital gains, step-up cost and time of being institutionalized. These are the facts I needed to hear. So again thank you for bringing these facts to my attention!
Also, if she's holding the stocks in a tax-deferred account, such as an IRA or 401K, she'll be paying ordinary income taxes on the proceeds as they're taken out from the account to pay for the medical expenses. There is no capital gains tax preference on withdrawals from a 401k or IRA.
The 401K or IRA may have its own named beneficiaries also. If you liquidate the house first and use it to pay the expenses, the other beneficiaries of the estate may not get their full share of the estate.
On the other hand, if you sell the house, you'll get hit with the capital gains tax upfront in one year.
The other thing I left out is whether the stocks are also a source of income and what consideration this might play in holding on to these assets.
Definitely get an accountant.
Last edited by lchoro; 06-29-2016 at 10:31 AM..
Reason: stock dividends
If your concern is only cap gains know that capital gains are inevitable, so now or later. They are relatively low right now.
Capital gains are on Hilary Clinton's agenda to be increased substantially. Do you want to chance the election for the rate you will pay?
Sell the darn thing and be done with it.
I second this.
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