For most of us, our home is our most significant asset and we want to be able to pass it on to our children. Not everyone is aware, however, that there are several ways to do this. In order to understand which method is best for you, consult with a knowledgeable estate planning attorney. If you reside in Southeastern Massachusetts or Cape Cod, contact Surprenant & Beneski, P.C. for personalized, informed guidance about this kind of asset protection and other estate planning issues.
Include Your Home in Your Will
This is probably the method that comes to mind as the simplest way of ensuring that your children inherit your home, but it may or may not be right in your particular circumstances. Drafting a will enables you to list your assets and name your beneficiaries.
Nonetheless, naming your children as beneficiaries who will inherit your home may have complications you did not foresee. For example, the court will put your will through the probate process which can be time-consuming and expensive, not to mention frustrating, for your heirs.
Another possible drawback is that if you have more than one child, and you give each an equal share, their individual needs and wishes may conflict, creating tensions or even major rifts in the family. It is entirely possible that one child will want to retain the home and one will want to sell it to meet debt obligations or to use the sale proceeds for another purpose.
Transfer Your Home to Trust
As your estate planning attorney will tell you, funding a trust with your home may, in some cases, be a better alternative. For one thing, creating a trust means that your home will not be part of the probate process, which will speed up your children’s access to your home after you die.
When leaving your home to your children in a trust, you have two basic options; in either case, you will appoint a trustee (individual or entity) to manage the distribution of assets.
- Revocable trust – in which the trustee will make the decision about how disagreements will be managed. A revocable trust has the advantage of permitting you to change the terms of the trust whenever you wish during your lifetime. It’s important to remember, however, that with a will or a revocable trust your outstanding debts will have to be paid before your children are able to inherit.
- Irrevocable trust – in which you give your home to your children while you are still alive. While an irrevocable trust may protect your gift from your creditors, it may still leave your home vulnerable to your children’s financial problems. Also, as its name implies, once complete, an irrevocable trust cannot be altered.
Sell Your Home to Your Children
In some cases, selling your home to your children is a viable option. But don’t be fooled into thinking that you can outsmart the government. If you charge your children a fraction of the market value of your home or lend them the money to purchase it, there will be complications.
If the IRS considers the sale price too low, they may decide your home was a gift and there is tax liability for the amount exceeding the annual exclusion. If you lend your children the money to purchase your home, you will be legally obligated to charge them interest and to declare that interest as income on your tax return.
Joint Tenant with Right of Survivorship
The words “Joint Tenant with Right of Survivorship” can give you another good option to ensure that your children inherit your home. These words provide you with the opportunity to leave your home to your children while avoiding the delays of probate and the costs of establishing a trust. They mean that ownership of your home will automatically transfer to your co-owners when you die.
The drawback to this kind of ownership is that you will no longer have full control over your home if, for example, you want to borrow against it or refinance it. Also, your home will be subject to your children’s debts which could result in a lien against the property itself.
Contact Our Experienced Estate Planning Attorneys Today
After working hard to purchase your home and make it a family treasure, you no doubt want to ensure that your children are able to inherit it in a timely, efficient manner. Make an appointment to discuss how this can best be done with our highly capable, empathic legal team.