Your home is likely one of your most valuable assets. Not only is it a significant asset in terms of finances, but it also comes with sentimental attachments. With so much emotion, history and monetary worth wrapped up in your home, it can be complex to figure out how to include it in your estate plan.
Residential real estate is complex, and transferring ownership can come with a variety of benefits and drawbacks for your heirs. Here are some ideas for having an efficient and smooth transfer of your home.
1. Your will
One straightforward way to pass on the family home to your children is to include your wishes in your will. All you need to do is specify who you want to inherit your home – you can name multiple people if you wish. When you pass away, the home will pass on to your named beneficiaries through the probate process. While this is an easy-to-understand option, it can be costly, slow and complicated in certain situations.
2. The deed
Another common method for passing on a family home is naming heirs as co-owners on the deed. You can simply list your beneficiaries as joint tenants on the deed. This allows them to take ownership once you pass away. However, one drawback of this approach is that you must report this transfer for gift-tax purposes. Additionally, if your child becomes the co-owner of the home while you are alive, issues may arise regarding financial trouble, the mortgage or selling the home.
3. A revocable trust
If you set up a revocable, or living, trust, you can transfer your home to it. You can maintain control of the asset during your lifetime and include detailed instructions on how to pass it down to your beneficiaries. When you pass, the trust essentially acts as a substitute for the will and the home transfers ownership outside of probate.