Inheriting A Home

How Can I Ensure My Children Will Inherit My Home?

If you’re like many Iowans, your family home is one of the most precious and valuable assets you own. It’s common to have strong feelings about what happens to that home when you die, and most homeowner parents ultimately want their homes to go to their children.

There are many different ways to accomplish this goal, but before you make your plans, it’s important to understand the financial and legal implications of the various options available to you.

Add It to Your Will

For many people, a will is the first thing that comes to mind when they think about leaving property to their children. When you draft a will, you list out your assets and name the beneficiaries you would like to inherit those assets upon your death.

Keep in mind, however, that there are certain limitations and drawbacks that could arise with this method. For example, the court will verify your will in a process called probate before any assets can be distributed. This can turn into a time-consuming and frustrating process for your beneficiaries.

Also, if you specify that multiple children should inherit your home, they will each have an equal stake in the property. If there are any disagreements about whether to keep or sell the home, the situation could turn difficult.

Establish a Trust

When you leave property or other assets to your children in a trust, they can receive their inheritance without court supervision or going through probate.

To leave your home to your children using a trust, you have two primary options:

  • Irrevocable trust – With an irrevocable trust, you can give your house to your children as a gift while you’re still alive. This protects the gift from creditors but may leave the home vulnerable to your children’s financial issues. As its name suggests, an irrevocable trust can’t be altered once the transfer is complete.
  • Revocable living trust – With a revocable living trust, you can leave your home to your children after you pass away. You can also specify exactly how you want your trustee to handle the property and change the terms of the trust during your lifetime.

Sell It to Your Children

Although this option won’t make sense for every family, some parents choose to sell their homes to their children. This can work nicely if parents want to use the money they earn from the sale to retire to a smaller home.

However, it’s important to understand that you must sell your home at fair market value if you to sell it to your kids. If you cut your children a break by selling them the home at a reduced rate, the IRS may consider it a gift, which could potentially lead to gift tax liability for the amount exceeding the annual exclusion.

Similarly, if you decide to loan your children money to purchase your home from you, you are legally required to charge interest on that loan and declare that interest as income on your tax return.

Contact an Estate Planning Lawyer Today

To learn more about your legal rights and how to ensure that your children inherit your home, contact Telpner Peterson Law Firm, LLP, for an initial case review.

 

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