Home Inheritance Financial Calculator

Financial Decision Calculator for Home Inheritance

🏠 Property Information

Enter the current details about the home.

$
Your best estimate of what the home would sell for today.
$
What your parent paid for the home originally.
$
Purchase price plus major improvements. Leave same as purchase price if unsure.
$
Enter 0 if the home is paid off.
7.0%
Typically 6–8%: realtor commissions + title + closing fees.
Determines state income tax rate on capital gains.
3.0%
Long-run average is ~3%. Adjust based on local market expectations.
Primary Residence Vacant / Not Occupied
Primary residence status may affect capital gains exclusion.
👨‍👩‍👧‍👦 Family & Tax Details

These details affect tax estimates and how proceeds are shared.

Adult children or other beneficiaries sharing the proceeds.
3 yrs
Your best estimate. This affects carrying costs, appreciation, and Medicaid exposure.
Yes No Not Sure
If yes, Medicaid estate recovery may apply to the home's value.
Yes No
$
If none, enter 0.
3.0%
Used to estimate real purchasing power of proceeds.
$
If home could be rented while waiting. Enter 0 if not applicable.
🏥 Care & Property Carrying Costs

These ongoing expenses affect how much equity remains when the home is eventually sold.

$
National average is roughly $7,500–$10,000/month for skilled nursing.
$
Property taxes + insurance + maintenance combined. Often $600–$1,500/month.
$
$
Legal and court fees if the estate goes through probate. Often $3,000–$15,000+.
$
If Medicaid paid for care, your state may seek repayment from the estate. Ask your elder law attorney for an estimate.
💳 Home Equity Financing Strategy

Optionally model whether using a HELOC, home equity loan, or reverse mortgage to pay for care changes the final outcome for heirs.

No, pay out-of-pocket Yes, model borrowing

Financial Comparison Results

All figures are estimates for educational purposes. Actual outcomes depend on tax law, Medicaid rules, and market conditions specific to your state and situation.

Detailed Side-by-Side Comparison
Net Proceeds Over Time — Both Scenarios
Net proceeds comparison chart
Cost Breakdown — Where the Money Goes
Cost breakdown bar chart
📈 Sensitivity Analysis

How does the net result change if key assumptions shift?

🎲 Scenario Range (Best / Expected / Worst)

Based on variation in appreciation, timing, and costs.

⚠ Medicaid & Estate Recovery Assessment
Assumptions & Limitations
📚 Key Concepts Explained

Plain-English explanations of the financial and legal concepts most relevant to this decision.

When someone inherits a home, the IRS "steps up" the cost basis to the fair market value on the date of death — not the original purchase price.

Example: Your parent bought a home for $120,000. It's worth $450,000 when they pass. If you inherit it and immediately sell for $450,000, your taxable gain is $0 — because your basis was stepped up to $450,000.

If the home were sold while your parent was alive, the gain would be calculated from the original $120,000 basis — a taxable gain of $330,000, potentially subject to capital gains tax.

The step-up in basis is one of the most significant financial advantages of inheriting rather than receiving a property during the owner's lifetime.

Capital gains tax is owed on the profit from selling a property. The profit is calculated as: Sale Price − Cost Basis − Selling Costs.

Long-term capital gains rates (for assets held over 1 year) are 0%, 15%, or 20% federally, depending on income. Some states also tax capital gains at ordinary income rates.

If the home was a primary residence for at least 2 of the last 5 years, the seller may exclude up to $250,000 of gain (single) or $500,000 (married filing jointly). This exclusion applies if the parent sells while alive — but typically NOT to heirs who never lived there.

The step-up in basis at death often eliminates the capital gains tax entirely for inherited property, which is a major factor in this comparison.

Medicaid is a government program that pays for long-term care for people who meet income and asset requirements. However, when a Medicaid recipient dies, the state has the right to seek repayment from the deceased person's estate — including the home.

This is called the Medicaid Estate Recovery Program (MERP). Rules vary significantly by state: some states pursue recovery aggressively; others rarely do.

Important: If Medicaid paid for care and the home passes through probate, the state may place a claim on the estate for the total amount it paid. This can substantially reduce — or even eliminate — the inheritance from the home.

Selling the home before death and spending those proceeds on care may satisfy Medicaid requirements, but timing matters. Consult a Medicaid planning attorney for your state's specific rules.

Medicaid's "lookback period" is typically 60 months (5 years). During this period, Medicaid reviews all transfers of assets — including giving the home away, selling it for less than market value, or transferring it to a trust.

If a transfer is found that violates lookback rules, Medicaid may impose a penalty period during which it will not pay for care. This can create serious financial gaps in coverage.

Selling the home at full market value and using proceeds for care is generally acceptable. Gifting the home or transferring it without fair compensation can trigger penalties.

Always work with an elder law attorney before transferring the home to avoid inadvertent Medicaid penalties.

A HELOC (Home Equity Line of Credit) lets you borrow against the home's equity, up to a limit, drawing funds as needed — like a credit card. Interest is typically variable. Monthly interest-only payments may be required.

A Home Equity Loan provides a fixed lump sum at a fixed interest rate, repaid over a set term — similar to a second mortgage.

A Reverse Mortgage allows homeowners 62+ to borrow against equity with no monthly payments required. The loan (plus interest) becomes due when the borrower dies, moves out, or the home is sold. Reverse mortgages reduce the equity available to heirs.

Using home equity to fund care can reduce heirs' out-of-pocket burden now, but reduces the net inheritance later. If the home declines in value or interest compounds for many years, heirs may receive significantly less — or the loan could exceed the home's value.

Probate is the legal process through which a deceased person's estate is distributed. If a home is in the parent's name alone and there is no living trust, it typically must pass through probate before heirs can sell it.

Probate can take 6–18 months (or longer), during which carrying costs continue — property taxes, insurance, and maintenance. Attorney fees and court costs reduce the final inheritance.

A revocable living trust or joint ownership with right of survivorship can allow the home to transfer directly to heirs without probate, saving time and money. Ask an estate planning attorney about your parent's current title and what steps could simplify transfer.

Selling now provides immediate cash to pay for care without ongoing property expenses, but may trigger significant capital gains taxes (especially without the step-up in basis) and carries Medicaid implications if the parent is already receiving benefits.

Inheriting later preserves the step-up in basis, potentially eliminating capital gains taxes — but means carrying the property (taxes, insurance, maintenance) for months or years, with uncertainty about timing and continued care costs.

The "right" answer depends heavily on: the size of the capital gain, whether Medicaid is involved, how long the parent is expected to live, local housing market conditions, and the heirs' financial ability to carry the property.

This calculator estimates these tradeoffs with your specific numbers so you and your advisors can make a more informed decision.