How to Give Your Home to Your Children Tax Free
By Lane V. Erickson, Idaho Estate Planning Attorney
As the popular saying goes, there is no free lunch, except sometimes, when it comes to Idaho estate planning, there is. Many of my elderly clients want to find a way where they can transfer property and money to their children tax free without having any issues or worries. This is especially true when it comes to the family home. The reason for this is that sometimes the family home is the only major asset that parents have in their estate.
Alternatively, it could simply be because the home has a great deal of sentimental value to the parents because it’s the place where they raise their children. For these and other reasons, because of their love for their children, parents want to make sure that their children can receive the home from them after they pass away.
The problem is, there are a number of different issues related to transferring a home to your children both while you are alive and after you die. These issues could include complications such as capital gains taxes, gift taxes, and also dealing with any liens or debts that may exist or could exist later on the home because of mortgages, judgements or Medicaid.
While there could be some complications, don’t despair. The knowledgeable and talented team of Idaho estate planning lawyers at the Racine Law office can help you find the option that will work best for you on how to transfer your home to your children tax free.
Our team of estate planning lawyers consists of partners Randy Budge, and Lane Erickson, and attorneys Nate Palmer and Dave Bagley. Each of our attorneys has received the highest ratings possible on several legal rating services, including Martindale and Hubbell, AVVO, and Justia. These ratings are earned based on feedback from clients, other attorneys and the judges we work with on a regular basis. Given our experience we believe that every client can benefit from having a customized Idaho estate plan.
In this article we’re going to talk about just a few of the ways that you can transfer your home to your children tax free. Keep in mind that this article is not designed to be exhaustive. Rather we are providing this article to simply to give you a few ideas of some of the things you can do. In order to carry out any of these options, or to learn about other options that you might be able to use, you should consult with and receive help from a qualified Idaho estate planning attorney. We would be happy to meet with you in a free 30-minute consultation to discuss these and additional options with you and to give you the information you need to make a decision on what will work best for you.1. Let the Transfer Happen at Your Death
The first and one of the best options you have that allows you to transfer your home to your children tax-free is to wait until you pass away, and transfer your home to your children through your estate plan. This means that you would name your children in your written last will and testament to receive your home after you die.
The reason this option works so well is because it deals with the two most common types of taxes that may exist and may apply to your estate. The first is the capital gains tax that could exist on the home. The second is the federal estate tax that applies to an estate that is above a certain size. Again, the purpose of this article is not to go into detail about how these taxes work or how they may apply to your estate, but rather to give you some options that you may be able to use to avoid these taxes.2. Sell It to Your Children for Full Price - With Annual Cash Gifts
There is typically fewer problems when you sell your home to your children for full price. Most people get into trouble because they want to sell their home to their children for a discount. When this happens, the tax related issues don’t go away. However, by selling the home to your children for full price, they’re typically fewer of these types of issues.
When it comes to capital gains taxes, you can do an installment plan for the sale of your home which allows you to spread the taxes out over time so that it isn’t a big hit all at once. You can also take the $500,000 home sale exclusion that’s offered through the tax laws. Finally, if it’s an outright cash sale, if you take that money and put it into a different home, within a certain. Of time then there is no capital gains tax, this is because the capital gains tax would simply be deferred until you sell the new home that you purchased with the funds from the old home.
Once again, the purpose of this article is not to provide exhaustive information about these tax options. Rather, this article is designed to let you know that some options exists. We encourage you to take your questions to a qualified estate planning attorney to help you understand these auctions in more detail.3. Outright Gift While You are Alive
The final option that you have is to provide an outright gift to your children. this simply transfers your deferred capital gains tax on to your children. In other words, if your children sell the home at some time, the capital gains tax that you would have had to have paid, will now be paid by your children instead.
However, so long as the value of your estate is below the lifetime tax exemption amount, you can make a gift of your home without having any estate tax apply. The key here is to know the size of your estate, and also to understand the applicable lifetime tax exemption that exists at the time that you transfer the home to your children.
We have helped numerous clients discuss these options during our free 30-minute consultation. If you have questions about these issues, contact us, we are confident that we can help you too!Enlist an Idaho Estate Planning Attorney to Help You
Our team of Idaho lawyers can help you with any of your estate planning or probate needs. Whether you are seeking to create or review an estate plan for yourself or would like to help a loved one, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho Estate Planning problems.