For many parents, transferring real estate to their children is an important part of their estate planning process. There are several ways that parents can do this, each with its own advantages and disadvantages.
In this article, UrbanTurf will explore some of the more common ways that parents transfer real estate to children.
- Gifting -- One of the simplest ways for parents to transfer real estate to their children is through a gift. In this method, parents simply transfer ownership of the property without any exchange of money. While gifting does not involve any tax implications for the children, it may trigger a gift tax for the parents if the value of the property exceeds the annual gift tax exclusion limit.
- Sale -- In this method, the parents sell the property to their children at a reduced price or with a low interest rate mortgage. This can be beneficial for both parties, as the parents can receive some financial compensation, and the children can acquire the property at a lower cost.
- Trusts -- Parents can also transfer real estate to their children through a trust. In this scenario, the parents set up a trust that holds the property, and the children are named as beneficiaries. The trust can be structured in a way that allows the children to receive income from the property, or they can receive the property outright at a specified time. Trusts can also provide tax benefits for both the parents and the children.
- Joint ownership -- Parents can also transfer real estate to their children through joint ownership, which mean the parents add their children's names to the property title, making them co-owners of the property. Joint ownership can provide several benefits, such as avoiding probate and allowing for the seamless transfer of ownership in the event of the parents' death.
- Life estate -- In this method, parents transfer ownership of the property to their children while reserving the right to live in the property until their death. This method allows parents to retain ownership and control of the property during their lifetime while ensuring that the property will eventually pass to their children.
Transferring real estate to children can be a complex process, so it is important to consult with an estate planning attorney when considering one of the options above.
Have a real estate-related question that you want UrbanTurf to cover? Shoot us an email at editor(at)urbanturf.com.
See other articles related to: transferring real estate
This article originally published at https://dc.urbanturf.com/articles/blog/how_can_parents_transfer_real_estate_to_their_children/20750.
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