One of the major elements of most estate plans is deciding how to handle your home. For many families, a home is among its most valuable assets. While everyone can benefit from an estate plan, it is particularly that homeowners create a plan.
To make matters more complex, there are many estate planning strategies to choose from when it comes to deciding what to do with your home. This article reviews some of the various strategies used to pass on ownership of a home.
# 1 – Probate
If you do nothing with your home and die without an estate plan in place, your assets will pass according to New York probate law. This creates a risk that ownership of a home will transfer in a method that you do not desire. If there are certain goals you would like to receive through transferring ownership of your home, it is a good idea to consider the other available strategies.
# 2 – Adding a Co-Owner
One of the most common strategies that people use to transfer ownership of a home is to add co-owners to an existing deed. Anyone who is listed as a co-owner on a date will automatically take ownership of a home in case something happens to you. Consequently, by adding a co-owner, it is possible to avoid probate.
This process, however, comes with some limitations. For one, any ownership in a home that is transferred to children is classified as a taxable gift which means this amount must be reported for gift tax purposes. Second, gifts made during your lifetime are subject to carryover cost basis, which means that a child will receive asses on a cost basis equivalent to what was yours.
# 3 – A Will
A will can be used to pass ownership of your home to beneficiaries. Utilizing a will means that you can make sure the appropriate party inherits the property. The home, however, will still pass through the probate process, which can be lengthy and costly.
# 4 – Trusts
Trusts are legal structures that allow an individual to retain control over assets and specify how assets should pass to beneficiaries. After a person’s death, a trust passes assets to beneficiaries without the assets needing to proceed through the probate process. One of the limitations to establishing a trust, however, is that they are complex to create and often costly.
# 5 – Sell Your Home
If it is unlikely that your children or any loved ones want your home, it is a good idea to consider selling your home. If you do decide to sell your home, it is important to consider the tax implications of a real estate sale. Current tax laws allow a married couple to exclude $500,000 of capital gains from the sale of a home. To claim this exception, the couple must have lived at the residence for 2 of the past 5 years.
Speak with a Knowledgeable Estate Planning Lawyer
Deciding what to do with your home is just one of the difficult estate planning that must be made. Fortunately, an experienced attorney can help you determine what makes the most sense for your situation. Contact Ettinger Estate Planning today to schedule a free case evaluation.