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Ways to transfer a house to beneficiaries

For many people in Winter Haven and Lakeland, their house is one of their most valuable assets. Because a house can have substantial monetary value, as well as a great deal of sentimental value, some people aim to keep their house in the family by passing it down to their children.

Passing a home from one generation to the next is fairly common. But some people might be looking for ways to accomplish the transfer so that it does not result in a huge tax bill for their estate.

A life estate is one popular method of transferring a home. Through this mechanism, a person can transfer their home to their children while still alive, and the parent retains the right to live in the home until their death. The problem with transferring the home through a life estate is that it can result in the parent losing out on capital gains tax savings of up to $500,000. Thus, for some people, an irrevocable trust can be a better way to transfer a family home.

Through an irrevocable trust, a parent can transfer the home into the trust, and then upon their death, the trust will distribute the home to the children, who would be named as beneficiaries of the trust. By using this method, the transfer is not taxed as a capital gain, which can mean significant tax savings. Furthermore, passing a home through an irrevocable trust does not involve probate, which means that the beneficiaries do not have to deal with the time and expense of that process.

A home can carry much value, and people often want to protect that value by passing it along to their children. Before doing so, however, it is important to understand the available legal options for effectuating the transfer. An experienced estate and trust administration attorney can help Florida residents with this and other estate planning issues.

Source: Forbes, "Avoid Potentially Huge Tax Repercussions: Don't Just Give Your Children Your Home," Mark Eghrari, April 5, 2016

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