You may start thinking about this question when there is an estate or investment planning. You would like to discuss this question either with your lawyer or financial planner.
This article may serve only for information.
There are often good reasons to transfer the house to adult children. This may avoid or lower taxes, which speeds up a sale after death and reduces taxes.
If the parent is removed from title entirely, the deletion of the asset from his Income Tax statement may create eligibility for government benefits.
If one or more of the children live in the home, or want(s) to in the future, putting them on title early may smooth that transition.
But...
1. Do the children own their own homes?
2. Is this house their principal residence? Remember, there may be only one principal residence.
3. How many children will be transferred?
If they own their own homes, taking title to a parent’s home may create tax trouble. The increase in value of a principal residence is treated differently than other property. If there are several children involved, it becomes even more complicated.
whether the house is transferred to children, or jointly to children and parents (both on title), and if any child is not living in the house, he/she is not be able to claim it as their principal residence. Increase in their share may be subject to taxes. To establish that value, refer yourself to a qualified appraiser as soon as possible. If you do it later, on a death or sale time, it will be less reliable.
How many children will share title? Will they be able to agree about disposition, maintenance, and other issues? If it is a simple inheritance, are they going to be
- joint tenants: last survivor takes all, the property stays in the family, or
- tenants-in-common: on their death, their heirs get only an interest?
If the parent intends to remain in the home, who pays the expenses? What if the parent initially can pay, but later can not? What happens if the parent ends up in a hospital, and return to the home is uncertain? Who does the upkeep?
Think about these questions, find answers before transferring title, discuss them with your lawyer
Put everything in writing so that you do not create a trouble for your heirs in present or in future.
