As a parent, you want to make sure that your home is passed on to your children after you are gone. Aside from its monetary value, your home also has a lot of sentimental value, so it’s understandable that you would want to make sure your children can inherit it without having to deal with any legal complications.
In this post, we will look at five proven strategies to make sure your home is passed on to your children in the event of your death:
If you and your spouse jointly own your home, you can add your children as co-owners. After you and your spouse are gone, your children can inherit the home without having to go through probate.
The problem with the aforementioned arrangement is that you cannot have full control over your home, since your children also have ownership interests in it. Moreover, if one of your children fails to pay their taxes or debts or if they get sued by a third party, a lien might be placed on their ownership interest in your home.
Transfer on Death
If you are a parent, you can add your children as your beneficiaries through what is called a transfer of death (TOD) deed. The deed allows you to retain full control of your home as long as you are alive. Once you die, your home is automatically passed on to your children (who are named in the deed) without having to go through probate.
The problem with a TOD is that you cannot set any conditions as to when and how your home should be passed on to your children. It is done automatically after your death. This can be a concern, especially if you have young children, as they might end up inheriting your home in the event of your untimely death. In such a scenario, the court might appoint a guardian to manage your property until your children reach the legal age.
California law allows you to gift your home to your children (as long as its value does not exceed $11.7 million) without incurring any gift tax. Aside from the loss of control over the property, the downside to gifting is that once the transaction is completed, the original cost of your home becomes the tax basis for your children. As a result, if and when your children decide to sell the home, they might have to pay a substantial amount of capital gains taxes.
Many people create a will to specify that their children should inherit your home – as well as other properties they might own – after their death. While it is a simple method, it does have its downsides.
First, depending on the value of your home, it might have to go through probate – even if you have named the beneficiaries in your will. Secondly, if your children jointly inherit your home, they might disagree with each other on who gets to live in it, how it should be maintained, and whether or not to sell it.
You can set up a trust, transfer ownership of your home to the trust, and specify when and how it should be passed on to your children. Once you do, your home becomes the trust’s property, which means it is protected against liens, creditors’ claims, and tort claims.
The best part about putting your home in a trust is that it does not have to go through probate in the event of your death – regardless of its value. A trust also allows you to set any number of conditions regarding who gets to inherit your home and under what terms.
For example, you can specify the criteria that your children need to meet to be able to inherit your home. Similarly, you can also specify the conditions under which your children might become ineligible to inherit your home.
You can set up a revocable or irrevocable trust, depending on your needs and goals. While both of these types of trusts allow you to avoid probate, there are significant differences between the two – in terms of whether or not they can be amended and the kind of protection they offer against liens, claims, and estate taxes. For this reason, it’s essential for you to consult a committed California estate planning attorney before setting up a trust.
Looking to Pass on Your Home to Your Children? The Right Legal Advice is Here for You
At Garmo & Garmo, we know that your home is your most prized possession. We can create a tailor-made estate plan that allows you to pass it on to your children without any legal hassles. With over 80 years of combined experience in estate and incapacitation planning, our attorneys are well suited to cater to your needs – regardless of the value of your estate and your financial goals.
To find out how you can pass on your property to your children, call our firm today at 619-441-2500 or contact us online and schedule a free consultation with one of our attorneys.