Goodspeed: How to leave a home to your children
QUESTION:What is the best way to leave my home to my two children? Simply put, their names on the deed? A trust? What is the best way to leave them my home and avoid probate?
ANSWER: You own your home and it is in your name. When you die, it is still in your name. There needs to be a legal process for changing the ownership of the home from your name to your children. The typical way is to open a probate case. Probate assists in the disposition of property owned by people who die.
If you have a will when you die, the probate process will allow for the property mentioned in the will to end up with the people designated in the will. If you die without a will, the probate process will decide who should end up with the property you owned.
The probate process can be expensive and quite involved. You generally need to hire an attorney who will have to file documents to open up a probate case and will have to make a final accounting of what happened and to close out the estate.
Going through probate could end up costing quite a bit of time and money to simply transfer ownership of your home from your name to your children.
You mentioned a trust. This is an option to transfer your home that avoids probate. You create a trust and transfer the title to your home into your trust. Upon your death, the property remains in the trust. The trust document will name your children as successor trustees and beneficiaries, and they would automatically own the property. Opening such a simple trust can be relatively easy.
You also mentioned putting your children’s names on the title with you as joint tenants with right of survivorship. Upon your death, the children become sole owners of the property. This transfer option is certainly possible, but may have considerable tax implications for your children.
When your children inherit the home by will or trust, they inherit the property at its value on the day you died. When you put your children on the title, they become owners of the home by gift, and will not get a “stepped-up” basis when you die. When they sell the home, they may have income taxes to pay of the profit of the sale, especially if you have owned the home for a long time and its value has increased.
Linda Goodspeed is a longtime real estate writer and author of “In and out of Darkness.” Email her at: firstname.lastname@example.org.