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What if any capital gains would we have to pay upon selling my parents house.

Seattle, WA |
Filed under: Special needs trust

Our Mother is 86 years old and has required 24 hour care for the past 3 years. Our Father past away January 2009. Since neither my sister or I could provide her care, we placed her in a very nice memory care home.
Our Father intiated a Special Needs Trust, but did not change the house title to his name only. Therefore, half of the house belongs to our Mother and half belongs to the Trust. We are running out of money and need to sell the house (currently appraised at $525,000) to pay for her care. We have also been renting the house for a little over one year (at $1400/month) to suppliment her care costs. At this time we have not found any records of purchase. We do recollect they paid about $16,000 for the property, and spent additional money to refurbish the house.

Attorney Answers 2


The basis of property can be tricky, especially in Community Property states. Here is an extract from IRS Publication 17 that may be of service to you. "Community property. In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. For this rule to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return.

Example. You and your spouse owned community property that had a basis of $80,000. When your spouse died, half the FMV of the community interest was includible in your spouse's estate. The FMV of the community interest was $100,000. The basis of your half of the property after the death of your spouse is $50,000 (half of the $100,000 FMV). The basis of the other half to your spouse's heirs is also $50,000.

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Mr. Fromm is licensed to practice law in PA with offices in Philadelphia and Montgomery Counties and services clients throughout the state of Pennsylvania. He can be reached at 215-735-2336 or at the email address listed below. He is rated as an AV Preminent attorney from Lexis-Nexis Martindale Hubbell having the received the highest possble rating in legal ability and ethical standards. In addition, he has received a 10.0 rating from AVVO and recently was featured as a 5Star Wealth Manager in the Philadelphia Magazine, November 2009 issue on page 123.
Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received.
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For more information about community property, see Publication 555, Community Property. "

In any event you should consult with an experienced estate planning attorney in WA.

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Your question is confusing. You say that the house belongs 1/2 to the trust but that your father never transferred it. You really should speak to an elder care lawyer to see if there are any alternatives to selling the house. If the house is in the trust it might not be necessary to sell in order to get Medicaid to pay for her nursing home.

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The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Dennis Brager is a Tax Attorney, and a State Bar Certified Tax Specialist licensed to practice law only in the State of California. Responses are based solely on California law and Federal Tax Law unless stated otherwise. Any federal tax advice contained in this communication is not intended, nor written to be used, and may not be used, for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

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