How to leave your house to your children in the best possible way
11 Jan The Best Way to Leave Your House to Your Children
Posted at 12:12h
A home is a valuable asset. By leaving your house to your children, you are giving them a legacy for the future. Most people do intend to leave their home to their child or children. Most people do not plan for costs like capital gains taxes or probate fees. Sparing your children from unnecessary expenses is a part of building generational wealth. This article will show you how to pass your house on to your children without it becoming a financial burden.
Wills are subject to the probate process. The court will have to verify that the will and its bequests are valid. The probate process can take many months, or even years. This means that your children won’t be able to inherit immediately.
Secondly wills are public records. To protect your children’s private information, you should create a trust.
Another disadvantage is that your children will have to pay capital gain tax if they decide to sell their house. If the value of the property has increased since your death, a large portion of the profit will be lost to taxes. Wills can also be contested. If you disagree with someone else’s decision regarding who inherits your home, a judge will decide the matter.
- Can you give your house to your children as a gift?
- You certainly can, but there are also some drawbacks to giving your home to your kids during your lifetime. You will need to pay gift tax on the extra value of your home, as most homes are worth more than the annual tax-free limit (i.e. $19,000 in 20251001010). You could be paying tax on hundreds of thousands. This amount will be determined by the increase in the value of your property since you purchased it, and not the value at the time the gift was made. This option is not ideal because it could affect your eligibility for Medicaid. What about a Transfer-on-Death Deed?
- You may avoid probate by using a Beneficiary deed, also known as a transfer on death deed. This document must be signed in Arizona before a
- notary
, and filed at the county recorder’s office. The beneficiary deed does not have any gift taxes attached to it. Capital gains taxes are based on the value of the property at the time the deed is transferred. This method does not allow you to make a minor your beneficiary. When you put your house in a
revocable trust your children will not have to pay capital gains taxes in the future. It also keeps your house out of probate, so your children can inherit immediately and avoid a long and costly court process.Avoiding probate is reason enough to set up a trust. It will not cost you a penny to leave your home in your will to your children. The cost of setting up a Trust is usually less than the cost for probate fees. As beneficiaries, the children will inherit the home when they are old enough. The trust will own the home until then and your successor trustee is responsible for all administrative duties such as paying property taxes and utilities.
Estate planning can help you protect your family home and your children’s inheritance
At Phelps LaClair we are estate planners. It’s our family business. We understand how important it is for you to protect your legacy and give your children a good financial start. It’s never too late or too early to start estate planning, whether you’re a parent or grandparent. If you’re interested in learning more about how estate planning can help you build generational wealth,
contact us today to schedule a consultation.
Photo by
Jeremy Alford
on Unsplash used with permission under the Creative Commons License for commercial use 1/5/25. (Old Town Scottsdale AZ)
