When planning your estate, one matter you may not think twice about is transferring ownership of your home to your children. However, it’s imperative to explore your options for this matter, as it may not be in your best interest to transfer ownership of your home. If you’re unsure why this is, you’ll want to keep reading. You’ll learn more about why this process may be right for your family and how Pennsylvania estate planning attorneys can help you understand the implications of your options to make the best possible decision.
What are the benefits and drawbacks of transferring my home to my children?
There are a number of reasons a parent may wish to transfer their home to their children. Often, transferring ownership helps ensure that this asset is no longer part of your estate. This can be beneficial if you are worried about the probate process or not qualifying for medical benefit programs.
However, it’s important to understand what will actually happen if you gift ownership of a home to your children. Generally, your child can incur a tax basis for the property. Essentially, this means that they will be responsible for paying taxes on the difference between what the home was originally purchased for and what its value is if the child eventually sells the home. Instead, if ownership is transferred upon your death, they likely will have to pay a small capital gain tax, as they will have an advantage for the basis of the property since they are inheriting it based on its date of death value.
You should also know that if you transfer the property for Medicaid purposes, you’ll incur a penalty if the transfer was made in the past five years before applying. Unfortunately, many believe that selling the home to their child for $1 will help them avoid the transfer from being qualified as a gift. However, selling the asset for less than it’s worth will be considered a gift for Medicaid purposes.
How do I transfer ownership of my home to my kids?
If you would like your children to have your home, understanding your options is critical. If you want to leave your home to your children for Medicaid purposes, you may choose to leave the property in an irrevocable trust. This transfers the property out of your estate. However, the trust must be irrevocable, meaning you cannot change the terms and conditions of the assets to take them back after receiving benefits.
You may also opt to sell the home to your children if you wish for them to own the property. However, you must sell it for a fair market value, otherwise it will count as a gift.
As you can see, there are several important considerations you must make if you wish to transfer ownership of your home to your children. These matters are not something you should embark on without first consulting an experienced attorney to help you make the best decision for your needs. At Friedman Schuman Layser , we understand how complicated these issues can be. That’s why our firm will do everything possible to alleviate the stress of this process for you and your family. Contact us today to learn more about your options.
