How Can I Transfer My House to My Child?

How can I transfer my house to my child? This is an important question. As you become older it becomes necessary to decide what to do with your home. Will you give the home to your children? If so, will you give it to them before you pass away or will you include it as part of your will for them to inherit the property after you have passed away? These are all questions that must be answered and in order to transfer your property to your child you must make this decision and take the legal steps to do the transfer right.

The process for transferring your house to your child is as simple as signing the deed, recording it, and gifting the home to your child in a legal sense so it is now in your child's name instead of your own. However, doing this is not without risks which you should consider before deciding when to transfer the home to your child. You also need to consider the timing of the transfer of your house.

Timing of the Transfer

When you consider transferring your estate to your children, there are three choices:

• Keep the property until your death and do the transfer in a will
• Sell the property
• Give the property away to your child

Each of these choices comes with its own sets of pros and cons that should be considered before making the choice about what to do with your property or how to transfer your property to your child.

Keeping the Property

The benefits of keeping the home until you pass away are that whoever inherits the house will only have to pay inheritance tax. Generally inheritance tax is much less than income tax for the same piece of property.

Another benefit to keeping your home until you pass away is that you will keep your place to live without being uprooted and having to find another place to live.

One negative to keeping your house is also the same as the benefit: the inheritance tax that will have to be paid. The amount of the inheritance tax that will be required to be paid often depends on who is inheriting the house. If a son or daughter inherits the house, the tax mat be is less than if you are giving it to a friend or even a sibling who earns more per year and needs to pay more income tax. This is good news when thinking about how to transfer your house to your child.

The amount of the tax will also depend on the current value of the home at the time of your death.

Another con to keeping the house occurs if you require nursing home care. Most states can actually require the sale of your home to pay for outstanding nursing home bills which have been accumulated due to your care before any public benefits will kick in.

Selling the Property

You could make the decision to sell the property rather than giving the property to your children. You could either transfer the property to your kids by selling it to them for fair market value, or you could sell the house with the intention of dividing the proceeds from the sale of your home among your children. However, if you sell the house for fair market value to your kids or otherwise, you will be required to pay some sort of income tax on the amount that you collect from the sale of your home.

A drawback to this option is that you will most likely need to find another place to live and may require care before your death.

Give the Property Away

The final option for how to transfer property to your kids is that you could just give the property to your children. The benefits of this option are that there will no inheritance tax on the property for the kids and the property is immediately theirs once all the legal items have been taken care of. However, they may face gift tax depending on the way the gift is given.

Once the property is theirs, your children will be solely responsible for the maintenance and all the other issues that go along with taking care of the property. This will leave you free and clear of those responsibilities.

However, there are some negatives surrounding this option as well. Once the property is in your child's name, it is subject to be taken if something should happen to your child such as a divorce or accident.

Also, if you give the house away, you will be unable to apply for state medical benefits for five years from the date of transfer. This option for transfering your house to your kids is, therefore, something to consider long before any health problems come about.

Typically the person that is given the house also sells the property at some point during her or his lifetime. This can lead to them having to pay high costs for taxes at the time the sale occurs because taxes will be paid on the difference between what you paid for the house when you purchased it and the current value of the home.