Clearing out Dad's house

Get an appraisal. If you have doubts about an item's value, hire a personal-property appraiser. Miller knows of a case in which $30,000 worth of 17th-century Japanese prints ended up at the dump. To find a pro, consult the American Society of Appraisers, which accredits its members in three main specialties -- general contents, antiques and decorative arts, and fine arts -- and a slew of subspecialties.

To reassure distant family members and ease the division of property, Smith has cataloged a home's contents with digital photographs that are keyed to a spreadsheet with descriptions of the items and their appraised values.

Sell or donate. Once family members have retrieved everything they want (or wouldn't want anyone else rummaging through), you can sell the remainder via an estate-sale company. If the value of a home's contents meets the estimator's minimum, the company will advertise and run the sale and remove the leftovers, for a cut of the proceeds (typically one-third, or a minimum of, say, $1,000 to $1,500).

Or you can donate items. If you intend to deduct their value -- on either the estate's tax return or your own (depending on who inherits the items) -- the IRS requires you to have a receipt. You can use online valuation tables (check the Salvation Army's Web site) or software, such as TurboTax's ItsDeductible, to calculate values.

Prepare for sale

Once you've reclaimed the house, you can deal with its condition. Now's the time to clean, repair and refresh the home, with the goal of de-personalizing it. "You want buyers to think, 'This is someplace I could move into and start to live,'" says Miller.

Hire a cleaning service for an intensive cleaning. Miller suggests painting in two contemporary, earth-toned shades and pulling up old carpets if there are hardwood floors underneath -- even if you don't intend to refinish the floors before showing the house. Remove outdated or worn window treatments, and replace them with miniblinds. Other simple, inexpensive cosmetic updates include painting kitchen cabinets and replacing countertops, faucets and light fixtures.

Poitras spent about $30,000 fixing up her dad's house. In June 2005, after one weekend on the market, the home sold for $50,000 more than she expected. "I was pleased, and I thought my father would have been proud of what we showed," she says. Poitras used her own money plus a life-insurance payout to finance the improvements. But if cash is an issue for you, ask contractors whether they'll accept payment from the funds you receive at closing.

Death and taxes

The taxable value, or basis, of your parent's home will be "stepped up" to its current market value as of the date of death. Ben Jennings, a financial planner in Tacoma, Wash., says that the tax treatment of the sale depends on how the house is used after the parent's death. Generally, as long as the estate owns the house and it's vacant, it's treated as an investment property, not a personal residence. Any appreciation in value accrued by the time of sale is taxed as a long-term capital gain, at 15%. If the home's value falls before it is sold, you can claim a tax-saving loss.

Video: Caring for parents long-distance

You and other beneficiaries of the estate can divide any gains or losses and report them on your personal income-tax returns (on Schedule D). Many families worry that if they hang on to the house too long, they will incur a taxable gain. But Jennings says the cost of preparing the house for sale and the agent's commission, which you deduct against proceeds of the sale, help offset that.

You will have to file state and federal tax returns for your parent. You'll also need to file a federal estate return if the estate's value exceeds $2 million this year and next, or $3.5 million in 2009. Plus, you may have to file a state estate-tax return. (For more on the tax obligations of an estate, see IRS Publication 559, Survivors, Executors, and Administrators.)

This article was reported by Pat Mertz Esswein for Kiplinger's Personal Finance Magazine.

Updated Sept. 14, 2009

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