Legal Question in Real Estate Law in California
Capital Gain vs. Senior Citizens confusion
My in-laws (ages 82 & 83) SWEAR they will have to pay capital gains on the sale of their California home, which they have lived in for over 20 years. They own it free and clear. A portion of their sale is going into in-law additions onto our home as they will then be moving in with us. Their remaining estate will probably be added to the living trust they currently have in place as my husband is their only child. I can not convince them that they are exempt for the usual reasons, i.e., their ages, the house being their primary residence and valued under $500,000. I really can not find any more straight answers or info other than those mentioned. My father-in-law cuts out every magazine and newspaper article he can find on the subject and mails them to us, but I'm afraid he's more UNinformed than INformed, as the articles relate mostly to non-senior couples with far more valuable estates than what he possesses. What can I do or what materials can I produce to ensure them that they are protected? My husband and I have suggested they contact a real estate attorney in their town, but my father-in-law is confident that he is correct and ''doesn't need one.'' Any suggestions? Thank you very much for your time and consideration.
3 Answers from Attorneys
Re: Capital Gain vs. Senior Citizens confusion
If your mom and dad have lived in this residence for the last few years, they are entitled to claim exempt capital gains on the sale, $250,000 for each. Therefore if the house is worth less than $500,000 there will be no capital gains tax if sold at this time. If they paid $50,000 to buy the house and sold for $500,000, the gain would be $440,000, all of which would be exempt.
Re: Capital Gain vs. Senior Citizens confusion
Age is not material here. As long as they have lived in the home as their primary residence for 2 of the past 5 years, they have a $500,000 exemption from any capital gains tax.
Re: Capital Gain vs. Senior Citizens confusion
It IS possible to have capital gains if the house sells for enough; They are only protected as to the first $500,000.00 in equity, and if the home is worth more than $500,000.00 and the price they paid for it, they will have to pay capital gains. It may be that your father-in-law simply does not want to sell and he is using this as an excuse, rather than tell you he does not want to sell. Also, there is no law that parents must leave anything to their children, so the fact that your husband is their only child is nothing to count on. The house and the money to be derived from it belong to your in-laws--best to leave them be.
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