'Her younger son lives in the condo, but wants to move elsewhere with friends'

"She is divorced and has two adult children in their early 20s." (Photo subject is a model.)

Dear Quentin,

My closest friend of more than 40 years is terminally ill, with most likely less than a year to live. She is divorced and has two adult children in their early 20s. She has done well financially and has worked with an attorney to set up an estate plan. That includes her primary residence, which she co-owns with her unmarried partner.

She recently mentioned that she is planning to sell a condo she owns that was not part of the estate plan when she set it up. Her younger son currently lives in the condo, but wants to move elsewhere with friends. If she sells it, she estimates that she would have a capital gain of about $100,000.

If she leaves the property to her children, they could potentially receive a stepped-up basis when she dies. She asked for my thoughts, as her plate is obviously full at the moment. Without sounding callous, my thought is that, given her prognosis, she may be better off not selling the condo and incurring the capital-gains tax.

Am I thinking about this correctly?

The Friend

Related: 'I know it's awkward to give advice to wealthy people': My wife, 50, has terminal cancer. Our estate is worth $18 million. How do we prepare?

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com. The Moneyist regrets he cannot reply to questions individually.

The condo may be an issue where she has control, but it may be a red herring.

Dear Friend,

This is not only a question of money. It's also a question of strength and how your friend wants to spend her remaining time. In this market, with stubbornly high interest rates and unpredictable demand for condos, which involve HOA fees, it could take months to sell.

If this were your friend's primary residence, she could exclude up to $250,000 in capital gains from her taxable income. (The limit is double that for a married couple.) As it is, this is a rental property, so I'm not sure it makes sense to sell the condo now.

As you point out, if she keeps the condo and it passes to her children, their basis would be reset to the condo's fair market value at the time of her death. If they subsequently sold it for roughly that amount, there could be little or no capital gain.

It's a big "ask" during a vulnerable time.

Suppose your friend purchased this property for $300,000 and it's now worth $500,000. If she sells it now, she could face a capital-gains tax on some of that $200,000 profit, after accounting for eligible improvements and certain selling costs.

If she has rented the property and claimed depreciation, there could be additional tax considerations. It's a big "ask" during a vulnerable time. Her prognosis and future medical requirements will naturally also play a role in her decision-making.

Another not-insignificant consideration: Selling a home is a time-consuming, exhausting, stressful and laborious process. She would likely have to navigate price adjustments, offers below the listing price, and potential buyers giving her the runaround.

Related: My son has a potentially fatal genetic disease. What should I do with my $1.3 million estate?

An arduous sale process

She may also have to devote precious time to the practical task of showcasing the condo for sale, and emptying years of living that would prevent a buyer from imagining themselves living there. Is that really how she wants to spend her time and energy right now?

First step: Get a valuation. Second step: Decide whether it's worth selling. Third step: Have her tax adviser calculate exactly what she would net from a sale after taxes and selling costs. Does she need the money for medical bills, nursing-home care or hospice care?

Medicare generally does not cover long-term custodial nursing-home care. If your friend does not have long-term-care insurance, she may need extra funds, and this house would allow her to access that cash without selling her primary home.

She could ask a very different question.

Encourage her to speak with both her estate-planning attorney and tax adviser, as the condo was not part of her original estate plan. Renovation costs, the health of the real-estate market in her area and selling costs will all determine how much tax she pays.

She does not necessarily need to turn every asset into cash simply because she can. At this stage of her life, she could ask a very different question: "What gives me the greatest financial security and the greatest freedom to spend my remaining time as I choose?"

The condo may be an issue where she has control, but it may be a red herring. The real question might be how she wishes to spend the next year, or so, or however long she has left. The condo could open the door to that wider, more meaningful conversation.

By emailing your questions to The Moneyist or posting your dilemmas on The Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.

More columns from Quentin Fottrell:

'I still don't have my MRI': My health insurer canceled my plan without warning. Is that legal?

'Please don't let this happen to you': My best friend died without a will - her neglectful family gets everything

'He does not have a spouse or children': My son has a serious genetic disease. What should I do with my $1.3 million estate?

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-Quentin Fottrell