This is one of the most important questions we get.
And most families don't even know it's a question.
When a parent moves into assisted living — or when they pass away — the family has a decision to make about what to do with the home. And the timing of that decision can mean the difference of hundreds of thousands of dollars.
It comes down to something called the step-up in basis.
What is the step-up in basis?
Here's a simple example.
Your parents bought their Laguna Niguel home in 1985 for $185,000.
Today, that home is worth $1.5 million.
If they sell during their lifetime, the gain is $1,315,000. After the $500,000 federal exclusion for married couples, they owe capital gains taxes on $815,000. That can be over $150,000 in taxes owed.
But if the home passes to you through the trust or estate at death, the cost basis resets to the fair market value on the date of death.
That means if the home is worth $1.5 million when they pass — and you sell it shortly after — your gain for tax purposes is essentially zero.
No capital gains. No federal tax on the appreciation.
This is what the step-up in basis means. And in South Orange County, where homes have appreciated dramatically over the past 30 years, the savings can be enormous.
So… should you wait?
It depends.
If the home is sitting vacant while a parent is in memory care, there are carrying costs — insurance, property taxes, maintenance, HOA fees. Those add up.
If the parent has significant equity above the $500K exclusion and the family can cover carrying costs, waiting for the step-up may save far more than it costs.
If the parent is in good health and living in the home, the question may not be urgent yet.
Every family situation is different. There is no one-size-fits-all answer.
What we do know is that this decision deserves a real conversation — with a CPA, an estate attorney, and a real estate advisor who understands how these pieces fit together.
When should you start this conversation?
Before you need to.
The families that make the best decisions are the ones who plan ahead. Not the ones who are forced to decide during a health crisis, while grieving, under time pressure.
If you have aging parents in South Orange County — even if the conversation feels too early — this is the right time to start.
We host free educational events through OC Real Estate Planners specifically for families navigating these decisions. We also connect clients to trusted CPAs and estate attorneys in the area.
📞 Call or text 949-351-3924
🌐 OCRealEstatePlanners.com | HudesGroup.com
Kristina & Eric Hudes | The Hudes Group | Keller Williams Realty | Certified Trust and Probate Specialists
