Tuesday, July 27, 2010
Should I Transfer My Home To My Kids Now?
Have you heard advice that you should sell your house to your kids now for $1? We advise you to schedule an appointment with us before you re-title property in your children's names.
Here are the reasons why you should reconsider this option and consider alternatives:
* Inheritance Taxes: Many people are under the impression that Pennsylvania Inheritance Taxes are more than they really are. Upon your death, property that is transferred to your lineal heirs (children) is taxed at a minimal 4.5% rate, that has remained steady for years and is not expected to change.
* Step Up In Basis: By gifting your property to your children for $1, you could potentially be giving them more of a tax burden if they end up selling the property later. Be careful.
* Your Children Will Own The Property: Let me repeat that. Once you gift your home to your children, your children will own the property. Even if you are a joint owner with your children, they will still own a share. The question becomes.... What if your child gets in trouble... What if your child gets divorced... What if your child goes through bankruptcy... If you don't think it could happen to your family, you are playing the odds.
There are other reasons why you should re-consider jointly titling property.
If you are seeking to avoid probate, you may want to set up a revocable living trust, which is a way to avoid probate. Keep in mind that probate is relatively simple in Pennsylvania and not as costly for the most part. If you are not concerned about probate (and you probably shouldn't be), then using a will to convey your house is a good option.
If you have multiple homes (i.e., home in Pennsylvania, vacation home in New Jersey or Florida), you should strongly consider setting up a living trust. This will avoid ancillary probate (probate in other states), which could be a real hassle.
Remember: Your estate plan is important, and there is no "simple" estate plan. Make sure you consult with our firm before you deed your property to your kids. Let us help you explore your options. To schedule your complementary consultation, call our office at (215) 706-0200 or email us at info@jawatlaw.com