As a parent with an adult child, you want to make sure that they reap the benefits of your estate. One of the best ways to do so is by transferring your home to your child, which if done correctly can be tax-free. Depending on your individual circumstances, desires, and needs, here are some of the best ways to pass your home on to your child.
Leave it in Your Will
If you want a very simple way to transfer your house to your child, do so by leaving it to them in your will. Assuming the value of your estate is less than $12 million, no estate taxes will need to be paid. Also, when your child inherits the home, they will pay less in capital gains taxes if or when they sell the property.
Make it a Gift
If you choose not to transfer your home to your child via your will, you can instead give it to them as a gift. While you will have to file a gift tax form since the property will be worth more than $15,000, you likely won’t be required to pay gift taxes, since you are allowed to gift almost $12 million worth of property to others during your lifetime. Should you be considering conveyancing, it is best to discuss this with an attorney who specializes in real estate law, since there may be numerous administrative details to work out along the way.
Sell Your House to Your Child
Should you choose this option, you will need to decide whether you want to sell your home at fair market value or less than its fair market value. If you sell at less than fair market value, the difference in price will be considered a gift. However, if you sell at full market value, you may want to hold a note on the home. Doing so, allows you to use the gift tax exemption to gift your child up to $15,000 annually to help make their mortgage payments.
Put it in a Trust
Finally, you can place your home in a trust. If you choose an irrevocable trust, your child will be named as the beneficiary. Also, the home will no longer be considered to be part of your estate, meaning estate taxes won’t need to be paid on its transfer.
No matter which of these options you select, talk over your plans with an attorney who is experienced in real estate law as well as estate planning.