How to leave your house to your kids
If you are like a lot of other people, your family home has become a special place where many happy memories have been made over the years. Perhaps you are thinking about passing your home on to the next generation, but have questions about how to leave your house to your kids.
If you’re considering leaving your house to your children, creating a clear estate plan will ensure that your money and other assets, such as real estate, are going to be distributed in a way that not only suits the interests of your family, but yours as well.
But first have a discussion with your children about whether this is something that they want. Would any of your children plan to live in the house after your death or would they plan on selling it? If you are thinking about leaving an investment property to them, would they be willing to assume the responsibility of maintaining the property and being a landlord? If none of your children are interested in keeping your house, what about your grandchildren?
There are several options when it comes to passing your home on to the next generation, all of which can have legal as well as tax implications. Therefore, consider which option works best for both you and your children.
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If you have made the decision to leave your house to your children, there are four possible options to make that happen. Selling the property to your children is one possibility, but you need to sell the house at a fair market value. Selling it at a lower price than what similar properties in your area are selling for could have tax implications because the IRS could look at the sale as a partial gift.
Consider setting up an irrevocable trust if you’re thinking about gifting the property to your kids while you are alive. This can protect your children against possible creditors in the future. However, if the recipient of the property has financial issues in the future, your home could be foreclosed on and used in a bankruptcy.
Bequeathing your property can be done by creating a revocable trust. With a revocable trust, you can name your children as successor trustees so ownership of your home would pass directly to them without probate.
As an added benefit, you retain control of all assets and property in your trust during your lifetime, and can make changes at any time. Another benefit? You can even spell out how you want your property to be handled after your death.
If you are a resident in one of the states or the District of Columbia that allow property owners to sign a type of deed transfer, “Transfer-on-Death,” you can use this option to transfer your home to your children to avoid probate.
No matter which option you choose, passing on your house to your kids can be complicated. Your best option is to talk to an attorney who specializes in estate planning. In the San Diego area, that would be the Law Office of David W. Foley, living trust attorney.