3 Ways To Leave Your House To Your Kids (Or Anyone Else)
Passing along real estate to your children or other heirs can be done with a minimum of stress, hassle and cost, as long as you’re willing to do a little planning. Here are three of the most popular ways to leave your home to your heirs:
1. Include your home in your will.
When you draft your will, you can include your home in the assets you distribute. For example, you can leave it to multiple children and direct them to sell it and split the proceeds.
Pros:
It’s easy for you to include your home among the assets distributed after your death. All you have to do is ask your attorney to include it in your will.
If they sell the property, they’ll likely pay capital gains taxes based on what the home was worth when they inherited it.
Cons:
Your heirs will have to go through the probate process, which can be expensive and time consuming.
Your will may be a public record that anyone can view.
2. Put your home in a revocable living trust.
A revocable living trust is a trust that you can change or cancel (revoke). In the trust, you name a trustee (that’s usually you) and a successor trustee (the person you want to inherit your home). Once you set up the trust, you transfer your home into it and when you pass away, your successor trustee takes control of the trust, and therefore, your home.
Pros:
Your heirs get your home upon your death without having to go through the expense and time of the will probate process.
If they sell the property, they’ll likely pay capital gains taxes based on what the home was worth when they inherited it.
Cons:
Setting up a living trust can cost thousands of dollars.
If your children are young, you’ll have to have a trustee manage the trust and home until they’re old enough to manage it on their own.
3. Add your children to the title of your home while you’re still alive.
You can give your home to your children by adding them to the title of your property as joint tenants (or joint tenants with rights of survivorship).
Pros:
When you die, your heirs automatically own the property without going through the probate process.
Cons:
There are often significant tax consequences when you give someone a valuable property.
If your heirs sell the property, they’ll likely pay capital gains taxes based on what you paid for the property back when you first bought it.
You can’t change your mind and take back your home.
Your heirs will have to agree if you want to refinance or take out a mortgage.
Need help considering your options? I can refer you to an attorney who can explain these (and other) options. Tax laws and tax rules are constantly being updated and interpreted. This article contains general information, so please discuss your individual situation with a trusted tax adviser before making tax decisions.
Powered by HomeActions for Laura S. Rossinow, Broker, Keller Williams Realty, Newton, MA