Understanding Capital Gains Tax Exemptions and Estate Legalities: Financial Advice from Liz
Expert Answers to Common Financial Questions
Capital Gains Tax and Family Housing
One of our readers asked: “I lived in a house for 45 years without charging rent to my daughter and her family, who moved in during the 2008 financial crisis. If I sell the house now, will I owe capital gains tax since it isn’t my primary residence anymore? Are there any hardship rules?”
Unfortunately, the IRS does not recognize such situations as hardships for modifying home sales exclusion rules. The capital gain will be calculated by subtracting the tax basis in the home (what you paid for the house and the cost of qualifying upgrades) from the sales proceeds, minus selling costs. You can exclude up to $250,000 of these gains, but only if you’ve lived in and owned the property for at least two of the past five years. The rules differ slightly for those who are married and filing jointly.
Learn more about the home sales exclusion rules here.
Dealing with Estate Settlement and Inheritance
A reader shares: “My mother recently passed away, leaving behind a sizable savings account and two retirement accounts. My sister, who handled all the finances, is being opaque about the money’s whereabouts. As I can’t hire a lawyer and don’t want to strain relations, what should I do?”
Your sister likely knows where the money is, given she handled your mother’s finances. It’s possible that the funds were used for long-term care expenses, which can be very costly. There are several possibilities, including financial elder abuse, scams, or gambling. It’s reasonable to ask your sister for clarity, especially as the potential beneficiary of these accounts.
Here’s more information about understanding financial and legal matters during this time.
Power of Attorney and Healthcare Proxies
From a reader: “I dealt with my father’s affairs during his illness and discovered that many institutions needed their specific forms for Power of Attorney and Healthcare Proxy. Can you advise on this?”
Indeed, some financial institutions insist on their specific forms for Power of Attorney. It can be a demanding process, but checking with your financial institutions now could save you a lot of stress later on.
Feel free to send more questions to asklizweston@XYZ.com or check out our website for more information.
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