Yo Liz, so get this – I’ve been living in this house for, like, ever, man. But then my daughter and her fam had to crash with me during that financial mess back in ’08. I was cool about it, didn’t even ask for rent. But then, about five years ago, I bounced and they’re still living it up rent-free. Now, I know I’m gonna have to pay some capital gains tax when I sell ’cause it’s not my main pad anymore. Any way I can catch a break here?
So, turns out the IRS ain’t gonna cut you any slack just ’cause you let your fam crash at your place rent-free. They’re all about that capital gain life. Gotta take what you paid for the house, add in any upgrades, and subtract that from the sale price to figure out your tax bill. You might be able to exclude up to $250,000 of that gain (or $500,000 if you’re hitched), but only if you actually lived there for at least two out of the last five years. If life happened and you couldn’t make the full two years, there’s a partial exclusion for folks in certain situations, like work or health stuff.
Hey Liz, check this out – my mom passed recently and my sis is handling all the legal stuff. She mentioned once that Ma had some decent cash saved up and a couple retirement accounts worth about $400,000, and that I was gonna get a piece of the pie. Now? Now she’s all, “Dunno where the money went.” Sis was the money boss for Ma for years before she passed. How’s that even possible, man? Can’t afford a lawyer, but I don’t wanna start a fam feud or seem like a cash-grabber either. What’s the deal?
If your sis was the money master for Ma and she’s sorting out the estate, she’s gotta know where the cash went, right? It’s a total mystery why she’s playing coy. Maybe Ma’s savings got eaten up by crazy expensive long-term care bills. Or maybe she got scammed, or gambled it all away, or worse – was the victim of some shady elder financial nonsense. Your sis could’ve set herself up as the account boss without Ma’s say-so, too. If you can’t swing a lawyer, you gotta ask your sis straight up what’s going on, no shame in wanting some answers.
Yo Liz, I peeped your piece about that parent who had to step in for their son when he couldn’t handle his biz anymore. You’re right on the money with that advice about getting a power of attorney and healthcare proxy sorted. But, lemme tell you, sometimes those general forms ain’t worth squat to the big dogs – the banks, mortgage peeps, and insurance cats. They want their own special paperwork. Had to hustle to get my pops to sign all that stuff while he still could, man, and it was beyond stressful. People gotta check if their banks and whatnot need their own forms, for real.
Financial places are supposed to be down with your regular power of attorney deal, but some of them are real sticklers for their own stuff, you know? Burton Mitchell, the estate planning guru in LA, says you might be able to smooth things over by talking to the higher-ups, but it’s a whole thing, man. Best to check in with your money peeps now to save yourself a headache later. Hit up Liz Weston with your money Qs at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or drop her a line at asklizweston.com. Lots more good stuff to read, so get on it!
