When mom or dad needs memory care or a nursing home, the paid-off family home is often the only money, and often you cannot borrow against it. Here is what a sale really costs in tax, who has the authority to sign, and the cases where you should not sell at all.
By Hans Goldstein, EA · Updated October 14, 2026
Yes, a successor trustee (or a conservator, or an agent under a power of attorney with the right powers) can sell the home, and the owner's $250,000 home-sale exclusion usually still applies even while the owner lives in a care facility (IRC §121(d)(7)). On a California home bought in 1978 for $185,000 and sold for $1.65 million in 2026, the tax is about $351,938 if the whole gain lands in one year. Written into the sale contract before closing, the same sale can be paid out over 10 years and the tax on the gain drops to about $88,158, plus tax on the interest. It is not right for every family. If the owner may not live long and other money can cover care, holding the house can beat selling it. Read "When this does not fit" before anything else.
You are probably here because the usual answers are closed:
So the choice is usually: sell, rent the house out, or sell and manage the tax. This page is about the last one, and about how to tell when it is the wrong move.
A widowed parent, 84, in memory care since 2025. The home is in a revocable living trust and was bought in 1978 for $185,000. With $40,000 of improvements the basis is $225,000. It sells in 2026 for $1,650,000 with 6% costs ($99,000). Other income: $55,000 a year of Social Security and pension. California.
| Sold for cash, all in 2026 | Paid over 10 years (structured) | |
|---|---|---|
| Gain after costs and basis | $1,326,000 | $1,326,000 |
| Less the §121 exclusion (single) | $250,000 | $250,000 |
| Taxable gain | $1,076,000 | $1,076,000 |
| Tax on the gain | $351,938 (32.7% of the gain) | $88,158 over 10 years |
| Tax on the interest the payments carry | Not applicable | $152,013 over 10 years |
| Cash each year | Whatever you withdraw | $200,862 a year, about $16,700 a month |
| After-tax money at year 10, if untouched | $1,715,552 | $1,864,619 ($149,067 more) |
The yearly payment of $200,862 is about what a private nursing home room costs in California ($182,135 a year, CareScout 2025), so a payout can be matched to the care bill instead of you drawing down a lump sum. A 5-year payout in the same example cuts the tax on the gain to $177,466 and pays $358,242 a year; a shorter payout saves less because more gain lands in each year. If the home were in Texas, the cash-sale tax would be $233,546 instead (no state income tax).
Run on October 14, 2026 with the Goldstein & Co. engine: 2026 federal brackets, the 3.8% net investment income tax and AMT (IRS Rev. Proc. 2025-32), and 2026 California brackets. The 5.0% payout rate is an assumption, not a quote. After-tax money at year 10 assumes nothing is spent and both paths earn 5.0%, taxed every year. These are estimates, not a quote.
Being straight with you saves time. A structured sale is the wrong move in these cases:
Spreading the gain does not erase the tax. It moves each year's slice into lower brackets and keeps the surtax and the Medicare premium surcharge (IRMAA) lower. The first $250,000 is excluded either way.
See the matching tools: the seller net sheet after tax, the structured sale calculator, and for a trust that owns more than a house, how a structured installment sale works. For the tax side of a large gain, Big Sale Tax has the technical detail.
You are the person who decides whether this is even on the table. A 15-minute scope call costs your client nothing, and I will tell you straight when the answer is "hold the house." The page for you is For Professionals.
Send me the sale price and rough basis. Within one business day I'll email you the actual number and the Seller's Guide to §453. If it doesn't fit your deal, I'll tell you that plainly.
No retainer · no obligation. Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Yes, if the trust gives the trustee the power to sell, which most do. The trustee signs, with a certification of trust for the title company. A POA cannot sell trust property. If the house is in the parent's own name, an agent can sell only if the POA covers real estate; otherwise a conservatorship may be needed, with court approval.
Usually yes. If the owner became unable to care for themselves and lived in the home at least one year during the five years before the sale, time in a state-licensed care facility counts as living in the home (IRC §121(d)(7)). A house in a revocable trust is treated as owned by the owner for this purpose. Your CPA should confirm the dates.
Take the sale price, subtract selling costs and the basis (what was paid plus improvements), then subtract the $250,000 exclusion. In our California example, a $1.65 million sale of a 1978 home leaves $1,076,000 taxable and about $351,938 of tax if it lands in one year. The same sale paid over 10 years cuts the tax on the gain to about $88,158, plus tax on the interest.
Sometimes. At death the basis resets to the value then (IRC §1014), so the gain can disappear. But you need another way to pay for care meanwhile, such as renting the house, and an irrevocable trust that stays outside the estate gets no step-up. It depends on life expectancy and other money. Compare it to selling before you decide.
The remaining payments go to the named beneficiary. The gain in them is income in respect of a decedent (IRC §691(a)(4)), so the heirs pay income tax as payments arrive, with no step-up on that part. That is why a short life expectancy argues against a long payout.
Usually not. A reverse mortgage requires the borrower to live in the home as a principal residence and becomes due after 12 consecutive months away for illness. A HELOC or new loan needs the owner's capacity and a lender willing to lend on an empty home.
It can. Medicaid counts the payments as income and treats an installment note as a transfer of assets unless it meets strict rules (42 U.S.C. 1396p(c)(1)(I)). Ask your elder law attorney before you change how the house is sold.
The first 15-minute scope call is free. A written analysis is $5,000. The calculators and this page are free.
These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.
Book my 15-minute callThis is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free; the written analysis is $5,000. On a funded structure the insurer pays a one-time commission to the brokerage firm that places it; it is built into the annuity pricing, not a separate fee.
A plain-English guide for sellers on how a structured installment sale defers the tax when you sell a business, practice, or property. It covers the math, the alternatives, and how to tell if your deal fits.
Leave your details and the PDF downloads right away. Within one business day Hans will email a preliminary read on which structure fits your deal. No retainer. On a funded structure, the insurer pays a one-time commission of about 4% of the amount structured to the brokerage firm that places it (Hans’s share is about 2.4%; no trail). It is built into the annuity pricing, not a separate fee.
📞 Hans Goldstein · 213-414-2808 · CA Insurance License #4273294 · Independent §453 specialist · Goldstein & Co. LLC
Hans Goldstein, a licensed insurance agent (CA Insurance License #4273294), will contact you and may discuss insurance products, including annuities.
Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. General education, not tax or legal advice for your situation.
