If your parents are reaching old age, you may have a number of concerns. One of the most common worries for children of aging parents is what to do with their home if they become incapacitated.
Most older adults reach the stage where they can no longer live independently, so they move into a skilled nursing facility or into their child’s home. This leaves the adult child to make important decisions regarding selling their house.
Selling your parents’ house when they’re medically or cognitively incapacitated can involve several legal steps. If you’re in this situation, you should know what your legal options are and what you should expect as you put their home on the market.
Determining Home Ownership
Only the owner of the home can sell it. Even if your parents have advanced dementia or are incapable of making informed decisions, you can’t sell their house until you have obtained the legal right.
If your parents are cognitively healthy and feel ready to sell their home, you can simply help them prepare and list it for sale. However, if they don’t feel like they can take care of the legal proceedings independently, your best option is to get power of attorney. This will allow you to make decisions about their property and finances.
Getting power of attorney is fairly easy if your parents are currently capable of making legal decisions. If you expect medical problems or cognitive decline in the future, it’s important to finalize the power of attorney before these issues start to interfere with their abilities.
Power of attorney isn’t always foolproof, though. Title companies don’t always accept power of attorney when the adult child of a homeowner tries to sell the house. They might question whether or not your parent was competent enough to sign the power of attorney agreement, and they may ask to meet with your parent to confirm the agreement.
Be prepared for this situation by keeping a careful record of all your legal documents.
If your parents are currently suffering from cognitive decline or a disability that prevents them from making an informed legal decision, getting power of attorney may not be possible. Instead, you will have to apply and be approved for guardianship.
To get guardianship over your parents, you’ll first need to file a petition with the court that states that your parent isn’t able to make decisions regarding their finances. Consult with an attorney as you create this petition. Guardianship laws vary from state to state, and the documentation can be complicated.
Preparing for Listing
Once you have the legal right to sell your parents’ home through power of attorney or guardianship, it’s time to prepare the home for the market. Hire a real estate agent at the very beginning of this process for assistance.
Your real estate agent will evaluate the condition of the home and compare it with others in the neighborhood to help you decide on a price.
Then, order the title report for the home. This will tell you if the mortgage is paid in full or if there’s a second mortgage on the house. You don’t want any surprises before or after selling the home, so the title report will give you valuable information.
This is especially important if your parents are currently unable to tell you accurate information about the state of the mortgage.
Your parents may have accumulated a wide range of items over the years, including furniture, clothing, and sentimental keepsakes. They will probably only take a fraction of these items when they move out, so you and your family will need to decide how to handle your parents’ possessions.
This can be a stressful experience for families, so be prepared for some tension as you and your relatives get to work.
This can be especially difficult if your parents have not previously expressed their wishes for their belongings. If you’re trying to sell the home quickly, consider renting a storage unit as a short-term solution.
As with any type of home sale, it’s up to you to decide whether or not to make repairs before listing. You could get more from the sale by fixing up the home, or you could save time by selling it as-is. In many cases, people list their parents’ home as-is because making the needed repairs is a great deal of work.
However, if the other homes in the neighborhood are modern and updated, you may have a hard time selling your parents’ house without any upgrades.
Tax Considerations
Paying taxes after selling your parents’ home can be complicated. You should consult with an accountant or lawyer before the sale to confirm the amount of taxes you’ll owe.
Property sales are exempt from capital gains taxes on the first $250,000 if the homeowner is single and on the first $500,000 for married couples. The homeowner also has to have lived in the home for two years and used it as their primary residence in order to avoid capital gains.
If you’re inheriting the money from the sale, your parents can gift you $15,000 per year tax-free. If you’re married, they can gift you and your spouse a total of $30,000 per year with no taxes. This plan is only possible if your parents are mentally capable of making the agreement, though.
Selling your parents’ home when they’re incapacitated can be a complex legal process, so you shouldn’t attempt it alone. With the help of a real estate agent, tax expert, and attorney, you can be sure that everything you’re doing is acceptable in the eyes of the law.
Enlisting the help of others also frees up more time for you to spend with your aging parents, which can be incredibly valuable during such a big life transition.
————————
Michael Carr is the Co-Founder & COO of BrandFace, LLC. He is also a real estate branding expert and international bestselling author. As America’s Top Selling Real Estate Auctioneer, he has sold billions of dollars in commercial and residential properties.