"My parents moved to a new house in a new state 30 years ago. For some reason, they put the house in my mom's name only. I think it might have been to lower state estate taxes, but their state doesn't currently have any estate taxes (and their estate is definitely lower than the $13.99 million federal limit for 2025). In the past 30 years, the house has appreciated considerably."
"Scenario 1: Mom dies while owning the house. No issues, beneficiary (dad or kids) inherits the house at a stepped-up basis, no capital gains. (No need to change the deed). Scenario 2: Mom and Dad decide to downsize and sell the house. Since Mom is the only owner, she will only be able to exclude $250,000 of the gain (vs. $500,000 if they both owned the house). Scenario 3: Mom decides to sell after Dad has died. Same as Scenario 2, she will only be able to exclude $250,000."
Parents moved to a new state and placed the house solely in the mother's name thirty years ago. The state currently has no estate tax and the estate is below the $13.99 million federal exclusion for 2025. The house has appreciated substantially, perhaps by about $800,000. If the mother dies owning the house, beneficiaries receive a stepped-up basis and avoid capital gains tax. If the couple sells while both alive or the mother sells after the father has died, the mother alone can only use a $250,000 exclusion. If both owned and qualified, they could exclude $500,000, which could reduce taxes by roughly $85,000 or more on $800,000 appreciation.
Read at Slate Magazine
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