The Dark Truth About Your Parents Home

When it becomes clear that your parents need more support, whether that means moving into an assisted living community or bringing care into the home, conversations tend to shift quickly. Decisions that once felt distant suddenly feel urgent, and the family home often becomes part of that discussion.

Selling can feel like the obvious solution because it seems like a way to support expenses with the next phase of care, reduce the responsibility of maintaining a home, and create a sense of stability during a time that already feels emotionally heavy.

In some situations, selling is absolutely the right choice. In others, it can quietly create financial consequences that no one intended. Before any decisions are made, it is worth slowing down just enough to understand how timing, taxes, and long term planning all intersect.

Why Selling During a Care Transition Can Have Lasting Tax Consequences

Imagine your parents purchased their home decades ago for one hundred thousand dollars. It is where holidays were spent, milestones were celebrated, and improvements were made over the years as life evolved. Today, that same home may be worth seven hundred thousand dollars or more.

If the home is sold while your parents are still alive, the IRS looks at the difference between what the home sells for and what was originally paid, along with documented improvements. That difference is considered a capital gain, and depending on the numbers, it can result in a significant tax obligation.

There is a primary residence exclusion that can help offset some of this. If the home has been your parents primary residence, they may be able to exclude up to two hundred fifty thousand dollars of gain if single or five hundred thousand dollars if married. While helpful, this exclusion often does not fully cover appreciation in homes that have been owned for many years, especially in markets that have seen strong growth.

This is often where families are caught off guard, learning only after the fact that a well intentioned decision made during a stressful transition came with a tax bill they did not anticipate.

What Changes When the Home Stays in the Family a Little Longer

Now consider that same home through a different lens.

When a home is inherited, tax law generally allows the value of the property to reset to its fair market value at the time of death. This is known as a step up in basis, and it can dramatically change the tax outcome.

If the home is worth seven hundred thousand dollars at that time and is sold shortly thereafter for a similar amount, the taxable gain is often minimal and in many cases nonexistent. This single rule is why selling too early can result in families giving up five or even six figures unnecessarily.

Holding the home does not mean it must be kept forever. It simply means preserving flexibility during a period when clarity and patience can make a meaningful difference.

Thinking Thoughtfully About How Care Is Supported

Of course, care needs are real and they matter.

There are times when selling the home is necessary to ensure proper support, comfort, and safety, and that decision should never be met with guilt. At the same time, many families are surprised to learn that there may be alternatives, especially when care is temporary, part time, or supplemented in other ways.

Some families choose to rent the home for a period of time, others keep it vacant while care arrangements evolve, and some hold onto it until there is a clearer long term plan. The intention is not to delay indefinitely, but to avoid making a permanent decision during a moment of uncertainty without understanding the full picture.

Planning Ahead Without Giving Up Control

One common misconception is that planning ahead requires parents to give something up or relinquish control. In reality, thoughtful planning often does the opposite.

Tools like a will or a revocable living trust allow parents to maintain ownership and decision making authority throughout their lifetime, while also ensuring that when the time comes, the home transfers in a way that is smoother and more tax efficient.

For many families, a trust becomes especially appealing later in life because it simplifies transitions, reduces administrative burden, and preserves important tax benefits, all without changing day to day control.

Well Meaning Decisions That Can Create Unintended Outcomes

Most challenges in this area do not come from poor advice, but from decisions made during emotionally charged moments.

Adding someone to the deed for convenience, gifting the home early, or selling quickly to relieve stress can all feel like caring and responsible choices. Unfortunately, these actions can unintentionally eliminate tax benefits that families did not even realize were available.

This is why slowing down, even briefly, can be one of the most protective steps you take.

A More Grounded Way to Think About the Next Step

If care needs are changing but there is no immediate requirement to sell, a thoughtful next step often involves gathering clarity rather than rushing toward action.

Understanding how the home is titled, estimating what the tax impact would be if it were sold today, gathering records of major improvements, and coordinating with both a tax professional and an estate planning attorney can transform a reactive decision into a well supported plan.

During times of transition, flexibility is often one of the most valuable resources a family has.

I'll leave you with this...

Decisions involving aging parents, care needs, and the family home are layered with emotion, history, and responsibility. They deserve time, compassion, and informed guidance rather than urgency driven by stress.

This is one of those moments where a measured approach can protect a lifetime of equity while also honoring the care and dignity your parents deserve.

If you ever want help thinking through timing, exploring options, or finding a trusted real estate or estate planning referral, I am always here to help guide that conversation with clarity and care.

You do not have to navigate this season alone.

My Best,

Jen

Ready to read more?