Should you transfer your home to your children?
Before transferring your home to your children, there are several issues that should be considered. Some are tax-related issues and some are none-tax issues that can have grave consequences on your livelihood.
The first thing to keep in mind is that the current federal estate tax exemption is currently over $5 million and thus it is likely that you may not have an estate tax issue anyway. If you are married you and your spouse can double that exemption to over $10 million. So, make sure the federal estate tax is truly an issue for you before proceeding.
Second, if you gift the home to your kids now they will legally be the owners. If they get sued or divorced, a creditor or an ex- in-law may end up with an interest in the house and could evict you. Also, if a child dies before you, that child’s interest may pass to his or her spouse or child who may want the house sold so they can simply get their money.
Third, if you give the kids the house now, their income tax basis will be the same as yours is (the value at which you purchased it) and thus when the house is later sold they may have to pay a significant capital gains tax on the difference. On the other hand if you pass it to them at death their basis gets stepped-up to the value of the home at your death, which will reduce or eliminate the capital gains tax the children will pay.
Fourth, if you gift the house now you likely will lose some property tax exemptions such as the homestead exemption because that exemption is normally only available for owner-occupied homes.
Fifth, you will still have to report the gift on a gift tax return and the value of the home will reduce your estate tax exemption available at death, though any future appreciation will be removed from your taxable estate.
Given the multitude of tax and practical issues involved, seek counsel before making any transfers of property.
21 “Mobile Friendly” Elder Care / Senior Care Directories
If you need help in planning for and/or dealing with this elder care matter or with any Elder Care / Senior Care issue, you can find the help you need in one of the following 21 “Mobile Friendly” Elder Care / Senior Care Directories. These Elder Care / Senior Care – specific Directories are sponsored by the National ElderCare Matters Alliance, an organization of thousands of America’s TOP Elder Care / Senior Care Professsionals who help families plan for and deal with a wide range of Elder Care Matters.
James J. Ruggiero, Jr., Esq.
Ruggiero Law Offices, LLC
An ElderCare Matters Partner
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Things to Consider Before Transferring Your Home to Your Children