How to incorporate a home into an estate plan

| Nov 12, 2020 | Estate Planning And Probate |

A Texas home is one of many assets that you may be able to transfer to a spouse, adult child or grandchild after you pass. There are financial, logical and emotional components that you must contend with when deciding what should happen to it after you are gone. Ideally, you’ll have a conversation with your family and other advisers to ensure that your wishes are respected regardless of your decision.

Will anyone want to inherit the home?

There is no guarantee that a spouse or child would have the time, money or desire to maintain a large home after your death. If the home was meant to be used as an investment property, you can’t be sure that anyone would have the interest or capability to serve as a landlord. Although you may want nothing more than to keep the house in the family, it might be best to allow a beneficiary to sell it and use the proceeds for other purposes.

Consider the tax implications of your decision

If you list your children or other parties as additional owners of the home, that ownership interest might be considered a gift. The value of that gift could negate some or all of your federal estate or gift tax exemption. Furthermore, whoever becomes the new owner of the house might not benefit from a step-up in the property’s cost basis.

Ultimately, whoever obtains the property might need to pay a significant tax bill whenever it is sold. It’s worth noting that you might also need to pay capital gains taxes if the home is sold before you pass. This is generally true if you make a profit of greater than $250,000 on a property that you owned as an individual.

An estate planning attorney may assist in the process of putting a home or other property in a trust. Legal counsel might also be able to help you decide whether to sell a home as opposed to letting it pass to a child or other beneficiary.