September 13, 2018

Are you thinking about estate planning and real estate and planning to add a child to the house title? Many people may miss out on the possible property tax increases associated with this.

A parent usually would add a child to the title of the parents’ home for estate planning purposes, which means that the parent wants the property to go to a specific child after the parent has passed away. However, failing to consider all of the various estate planning aspects associated with this as well as the tax implications can be especially confusing.

It can be very difficult for parents to handle their estate planning this way since the unintended tax consequences may affect everyone involved. There are other ways to ensure that the title of a person’s home passes down to the children wanted without adding those people specifically to the title. Equality among children seems like a good idea on the surface, such as when a person wants to add multiple children to the title, but there are flaws in this kind of logic. First of all, parents cannot necessarily assume that a child will outlive them. 

A joint ownership of the home could lead one child to become the sole owner of the home. There are often smarter ways for parents to own the property, such as putting the home inside a living trust and determining who will become the owner of the home when the parent passes away.

A living trust takes into account various changes in life that can occur from the day that the trust is structured through when the parent dies. Furthermore, the parent might also put together a will that designates the beneficiaries of his or her estate by naming the individual who will get the home upon the parents’ death. In other cases, you may be eligible to use a transfer on death instrument that designates who is able to receive the home when the parent passes away. Future tax issues should also be considered. A real estate taxing body or your local tax successor officer should certainly be contacted to discuss the relevant issues involved and how to avoid unintended tax consequences that can follow your heirs for years to come.