Pass Down Your Home Tax-Free: The Ultimate Guide
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- เผยแพร่เมื่อ 1 ต.ค. 2024
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In many families, it's customary to pass on the family home to surviving children after the parents' death. You may be considering how to give your child or children your home without the sting of taxes later. It is possible, and there are a few ways to accomplish it, but it takes some advanced planning to make sure everything happens in a way that provides the most benefits to your family.
You may be concerned about Medicaid “taking your house” or spending down your assets to receive Medicaid benefits. “Estate recovery” occurs after your death, when the state goes through your assets to recover costs of your long-term nursing home care while you were alive. Since a house is often the only major asset many individuals have, frequently, the home is sold and the funds are used to repay Medicare; however, you can protect your home from a Medicaid estate recovery and sale.
WRITING YOUR HOUSE INTO YOUR WILL
One way to pass a home to your child or children is to make a will and designate a beneficiary for your home in your newly created will.
Although estate recovery issues need to be considered using this method, taxes can generally be reduced or eliminated as individuals receiving property upon the death of another are entitled to an adjustment in the cost basis (a step-up) when there are built in gains.
HOW TO GIFT YOUR HOUSE
Gifting the family house to children has consequences that are often unforeseen by families looking to safeguard their assets. Making such a transfer puts you in a difficult position if your children go through divorce, bankruptcy, incur liability due to a lawsuit, or other financial problem occur that may require re-selling the house.
If you're planning to move out of the house now, you can give the property to your child, however attorneys generally have better techniques than making such a transfer. For help passing on your family home, contact a Wisconsin estate planning attorney.
HOW TO GIFT YOUR HOME WITH A LIFE ESTATE
A Life Estate allows you to transfer part ownership to your children (or anyone else) while you're alive. You can live in it (or rent it out) during your lifetime and, when you die, the remaining ownership passes to your kids (or others to whom the asset was transferred), who may then take full possession and ownership of the assets.
Placing the home in an irrevocable trust with your children as the beneficiaries is another option. Doing so may help you avoid estate taxes, qualify for Medicaid for nursing home or assisted living facility expenses, and protect the house from Medicaid estate recovery. Careful planning is a must as making a transfer to an irrevocable trust may cause an ineligibility period for Medicaid for a period of time after such a transfer of your home. If the house is eventually sold, the proceeds remain in the trust and the proceeds of the sale will be passed to the trust beneficiaries.
How to Pass Your Home to Your Children Tax Free
Thank you for another well-done video. Folks don't make medicaid easy to understand do they!?
Thank you for your kind words and support! We completely agree-Medicaid rules and regulations can be quite complex and challenging to navigate. Our goal is to break down these topics into more digestible and straightforward information, so viewers like you can have a better understanding of the subject matter.
Stay tuned for more videos on Medicaid and related topics. We appreciate your engagement and hope to continue providing valuable content. Thanks for watching!
This is our article series from our blog.
www.heritagelawwi.com/blog
My understanding is that a will isn’t enough, ie the beneficiaries will still have to go through probate.?
That is correct. Having a will does not bypass probate. A will still needs to go through the court for validation. To avoid probate, you might consider using alternative tools that are designed to bypass probate -- like living trusts, joint ownership arrangements, or payable-on-death accounts. These can facilitate a smoother and more private transfer of assets if used properly -- but they must be used properly. Consulting with a professional can provide you with options tailored to your specific situation.
@@heritagelawoffice yup. Unfortunately that ship sailed for now. I’m the in law. I tried to tell them. Won’t happen again.
Revocable living trust
What about setting up a Trust?
Setting up a trust can be a great estate planning tool for passing down your home tax-free. There are two main types: revocable living trusts, which offer flexibility, and irrevocable trusts, which provide stronger asset protection. You should consult with an estate planning attorney to determine the best option for your situation and proper creation and funding of that trust. Thanks for watching!
Can't be a complete guide in under 4 minutes
You're absolutely right, it's challenging to create a complete guide with this length of video. We'll be producing longer content in the future to cover more information on this topic. Stay tuned for these more in-depth videos. Thanks for watching
If I get part ownership, can I homestead it?
Homestead exemptions and rules can vary depending on your location and specific circumstances. Generally, if you have part ownership of a property and it is your primary residence, you may be eligible to claim a homestead exemption. However, there may be additional requirements or restrictions based on local laws and the type of ownership you have.
To determine your eligibility for a homestead exemption and understand how it would apply to your situation, it's essential to consult with a local attorney or tax professional who is familiar with the laws in your area.
We hope this helps! Be sure to check out our other videos on estate planning for more information. Thanks for watching!
Is this for Canada as well?
Thank you for watching the video. Unfortunately, we are unable to provide any information on Canadian law.