Q. My 88-year-old mother-in-law has dementia and is in a care home. My sister-in-law has power of attorney to manage her affairs. We're wondering what to do with my mother-in-law's mortgage-free 55-year-old home. It's vacant and in need of much repair. Should we sell it now, as is, while she is living or wait until she passes?

— J. Fung, Honolulu

A. This question deals with real-estate pricing trends, but probably more importantly, how best to plan for taxes.

It's good to get at these questions now and not after your loved one passes away. Not dealing with them now could mean paying out more taxes than your family would like later.

For starters, let's separate the tax issue from the real-estate issue.

At first blush, it may not make sense to sell it now. Let's assume your in-laws bought the home for $50,000 and net $500,000 after sales costs.

After subtracting the property's cost and your mother-in-law's $250,000 capital gains exemption, the 15 percent federal capital gains tax and 7.25 percent Hawai'i state tax would apply to the remaining $200,000. She'd end up paying about $44,500 in taxes on the sale.

The after-tax net would be approximately $455,500.

That compares to possibly passing the house to heirs tax-free when the estate is distributed.

But you should really take a deeper look at your mother-in-law's entire tax situation and how best she can pass on the estate to her family, said Patrick Ibbs, a Kaua'i-based certified public accountant.

You and your sister-in-law should first tally the value of the estate. Total up any cash, insurance, stocks, bonds, annuities and real estate. Subtract from this debts and potential funeral costs.

If it comes to $2 million or more, there are different tax strategies to take, Ibbs said. It might make sense to sell the property if the estate is substantially more than $2 million because amounts above that threshold can be subject to taxes of as much as 47 percent.

Below $2 million there is no federal estate tax.

If the house is turned into cash, your mother-in-law could reduce the estate's value by giving some of it away each year until it goes below $2 million.

She can give gifts of up to $12,000 annually to friends or family members without tax consequences to anyone.

If the estate is less than $2 million, it makes more sense to deal with the home sale after your mother-in-law's death, Ibbs said. Heirs won't be taxed on the assets that are distributed.

Further, if they get a house valued at $500,000 and immediately sell it for the same, there shouldn't be any taxes, he said.

These are just general scenarios, and each person's situation differs, so seek out professional advice for a specific answer to your tax questions.

There is a different answer when you contemplate the situation from a real-estate perspective.

Corinda Wong, a Prudential Locations partner, said that in general, the market for as-is property has been softening and she doesn't see such properties making a huge jump up in price in the near future. As such, you might consider selling the property now, she said. You'd also escape paying future property taxes and insurance.

These days, she recommends people make repairs such as new carpet, appliances and paint if they are trying to sell something.

You then could rent out the property if you don't want to sell right away. Wong said she typically recommends against leaving properties vacant because of liability issues and because unoccupied real estate can deteriorate faster if not checked regularly.

She also recommended you get a real-estate agent to take a look at the house and assess the time and cost of repairs, and the neighborhood's market conditions.

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Do you have a question about personal finance, taxes or other money matters? Reach Akamai Money columnist Greg Wiles at 525-8088 or gwiles@honoluluadvertiser.com