When It's Time To Sell Your Parents' Home . . .
The Orlando Sentinel
ORLANDO, Fla. - The emotional trauma of selling parents' homes is one of those death-and-taxes inevitabilities. As though mourning the loss of a parent isn't enough, you have to let strangers take over the very symbol of your childhood memories. Even if the house wasn't in the family that long, adult children often contend with long-distance real estate arrangements, divisive siblings and entangling legal webs.
Even if you thought you knew the rules of selling and inheriting estate homes, the laws just changed. The recently passed federal tax package exempts more people from paying estate taxes and capital gains on home sales.
Armed with knowledge of the laws, preparation and patience, the process of selling what is often known as Grandma and Grandpa's house can go smoothly.
Grieving siblings should "always talk about what they want to do and when do they want to do these things so that everyone can be at the same place emotionally," said Cheryl Bradley, director for the New Hope Center for Grieving Children. "Communication and patience is of the utmost importance."
After memorial services, the remaining family members should come up with a time frame in which they will feel comfortable deciding the house's fate, Bradley said. When families fail to set up a timetable for dealing with real estate matters, they have different expectations. Sooner or later they become disappointed that things are moving too slowly or quickly for them, Bradley said.
"You as a family want to pull together, not apart," she said. As part of the grieving process, she said, brothers and sisters can get together in the house and reminisce about their memories of it.
There is one exception to the rule of mourning first, business later. Before you put away the grief, be sure to throw away the leftovers.
Attorney John Feldman advises families to clean out their parents' refrigerator as soon as possible.
"Once the power's been turned off, it's usually a terrible mess," Feldman said. "Other than that, you can be long distance and take care of everything."
With no kitchen messes hanging over their heads, the family members can deal with their pain until they are ready to establish a plan.
Parents can take some measures while they're still alive to make sure their house falls into the right hands with as few complications as possible.
Feldman said some of the saddest situations he has seen during his 15-year law practice are parents who lose their houses because they deeded them to their children. The intention is good - avoiding any legal complications ahead of time. But the reality is that the children may have to declare bankruptcy or pay off a debt to the Internal Revenue Service. The creditors seize the house to pay off the debts of the children who own it. The parents, who live there, end up homeless.
"The last thing you want to lose is your home," Feldman said. "Parents need to keep control over their assets."
Alternatively, the parents can keep the house and, by law, it will go to their heirs when the parents die.
Also, if the parents establish a revocable trust, their heirs can avoid paying $600 to $1,500 in administrative court costs and attorneys fees, and the parents can revoke the trust if any problems arise, Feldman said.
If parents decide to leave the house to someone other than their heirs, the estate will be subject to probate court proceedings, Feldman added.
Increasingly, parents raise one family, get divorced and have a second set of children. If a parent in that situation dies, the spouse will get a life estate to live there till death. Then, all of the children will get an equal share of the house value, Feldman said.
For children left with an estate, the options are numerous: Sell the house and equally divide the proceeds of the sale; keep the house for rental income, designating one child or a property manager to rent the property and keep it maintained; let one of the children buy or rent the house from the others.
If the house is in a nice location and holds fond memories, the children might want to take turns using it as a vacation house. They will have to establish a fund for maintenance, insurance and taxes.
In some cases, one child lives with and cares for an elderly parent. The other siblings may give that caregiver a life estate so he can continue to live there throughout his life. At the time of that sibling's death, the house could be sold and the remaining siblings, or their children, could divide the proceeds, said attorney Kenneth Murrah, who specializes in estates. The life tenant may even rent the home and move elsewhere. Also, the parent may designate someone in particular to own the house after the death of the child who lived there. Murrah cautioned that the state does have some restrictions on dividing a house when a spouse or minor child lives there.
Of course, some family members can be hard to find. Feldman said that people in Florida are considered dead if they haven't been heard from in seven years. The other children can file what is called a partition lawsuit to force the sale of the home when a long-missing sibling cannot be found.
Despite all the options, parents almost always give the house to their children, and those offspring usually decide to sell it, Murrah said.
To sell a house as an estate, children first need to ask their parents' former neighbors and the estate attorney for the names of real estate agents who specialize in the area. Ask the agents how many houses they've listed and sold in the area during the last six months and check on their references.
If they don't live in the area, the children could be counting on the agent for things such as marketing the house, arranging repairs and making sure the property is maintained and secured.
In addition to choosing a real estate agent, the heirs should arrange for their parents' mail to be forwarded and continue insurance payments on the house even if it is going to be vacant.
Other chores include finding reliable maintenance services to keep the lawn trimmed and paying for utilities.
Children should also decide ahead of time how they will handle decisions about prices, offers, repairs, etc. Would they prefer majority rule or unanimous decisions?
In terms of timing, Sutton said, try to have the house listed and a brochure about the house available during the estate sale. Potential buyers often inquire about the house during estate sales, and the information should be available.
If there is no estate sale, heirs might consider leaving enough furniture in the house to make it look appealing and as much like a model home as possible.
When the house sells, any proceeds the children get from the sale will determine capital gains taxes. Congress just changed the law on capital gains. Previously, homeowners age 55 or more could take advantage of a one-time exemption from $125,000 of profits. The new law increases the exemption to $250,000 for individuals or $500,000 for couples.
Another recent change in tax laws doubles the amount of inheritance people can exempt from estate taxes. Previously, heirs did not have to pay taxes on estates worth up to $600,000. Under the new law, the exemption will rise over 10 years to $1 million.
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