If you’re a parent, you probably want to leave assets to your children to help create a secure financial future after you pass. You don’t want them to struggle financially. You also want to ensure they receive items of personal meaning and continue the legacy you leave behind.
Giving your child your home can offer various benefits. They might reap some tax benefits depending on where the home is and how you transfer the property. They can also avoid probate if you establish the appropriate type of tenancy or trust.
Determining the best option while including your home in your estate plan is crucial. It can ensure your child doesn’t face unnecessary lawsuits or delays in distributing your assets when you die.
Below are the most common options for transferring a home to a child during estate planning.
Include the Home in Your Will
A simple method of transferring your home to your child is naming them to receive it in your will. However, what most people do not understand is that a Will presumes that your assets will have to go through a probate process/court proceeding after you are gone. This process generally takes 6 months to one year to complete (in Florida) and can hold up the family from being able to sell the house.
Distribute Your Home as a Gift
You might not want to leave your home in your will for multiple reasons. Instead, you can gift it to your child. It might not be subject to gift taxes depending on the circumstances. You can give away assets as gifts without triggering gift taxes if the value is below the maximum allowable exemption. However, there may be capital gains complications for your child later on. You may lose some of the homestead tax exemptions you receive, and you may be subjecting part of your homestead to your children’s creditors (in Florida) if they are not also living in the home. Consult your estate planning attorney to determine how much that tax bill might be.
Sell Your Home to Your Child
You must determine whether you want to sell your home at or for less than its fair market value. The price difference is considered a gift when you sell your home for less than the fair market value.
However, selling at market value can create tax complications, as your basis for the property does not pass to your child as it would if you left the home to your child in a trust.
Establish a Trust
A living trust allows you to manage your asset during your lifetime. You have control over it while you’re alive and determine who will receive it when you die.
Transferring your home into trust and naming your child as the beneficiary of your trust also avoids probate. That means your child won’t have to wait for the court to validate your will and authorize the distribution of your assets. Instead, they will assume ownership automatically upon your death.
Enhanced Life Estate Deed (a/k/a “Ladybird” Deed)
Finally, in Florida, you can do an enhanced life estate deed and name your children as the remainder beneficiaries of your homestead. You retain the right to live in the house, sell it, mortgage it….essentially do whatever you want with it during your lifetime. At your death, the homestead belongs to the children named in the deed. They will record your death certificate, and they can immediately turn around and sell it. However, there are pros and cons to this type of deed, so you should consult with your estate planning attorney to see if this deed is the right fit for you.
Protect Your Home with a Comprehensive Estate Plan
You should contact an experienced estate planning attorney to discuss all of the options available to your family. Leaving your home to a child requires following specific laws and procedures, especially if your child is a minor.
Our Tampa estate planning attorneys can advise which methods would be the most beneficial so that the transfer is seamless and prevents disputes within the family. Call us today at (813) 438-8503 to learn more about how to safely leave your home to your child in your estate plan.