Jaleesa, you must be crazy! What are you saying? Of course I want to put my house in my kids name, so I transfer my home to children when I die… What is wrong with that?
Here is why you probably shouldn’t transfer ownership of your lifelong home to your kids without talking to a legal pro first…
Say you bought the home for $250,000 and now it’s worth $1,000,000. When it comes time to sell, the kids may be responsible for a very hefty capital gains tax bill on $750,000! 💸💸💸💸💸 Yes, that’s an emoticon that represents money literally flying out of your pocket…
Instead… Do this if you are asking yourself how to transfer your home home to children.
Parents, consider putting the house in a revocable living trust. 💡
- This offers several advantages. Firstly, it allows for seamless transfer of ownership upon the parents’ passing. By avoiding the probate process you can reduce cost, time and headaches.
- Second, assets in a revocable trust, also known as a living trust, may be eligible for a step-up in basis when the trust grantor dies. This means that any gains are based on the asset’s value when the grantor die. This can reduce your tax bill. When the grantor dies, the trust assets are included in the grantor’s estate. They will receive a new basis equal to the fair market value (FMV) on the date of the grantor’s death. Assets held in irrevocable trusts, however, are passed to heirs at their original basis. This is because irrevocable trusts exist outside of your estate.
- Third, a revocable living trust provides flexibility during the parents’ lifetime. It allows them to retain control and make changes as needed. It also facilitates a smoother transition in case of incapacity, ensuring a designated successor trustee can manage the property without court intervention.
How to transfer your home to your kids…
👩🏼🏫 By placing the house in a trust, parents can outline specific instructions on how the property should be managed and distributed. This provides clarity and avoids potential conflicts among heirs. This legal arrangement can offer both financial security and peace of mind for elderly parents and their children. Consider these tips if you are figuring out how to I can best transfer my home to children without too much hassle, probate, and less taxes.
This is for general education purposes only. This is NOT legal or tax advice. There are other considerations that you may have, such as protecting assets from nursing home costs. ALWAYS talk to a legal professional such as an Estate Attorney, and tax professional (such as @maslertax ) before you make any decisions.
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