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Heritage Law Group June 7, 2019

Your home is likely one of your most significant assets. You may have raised your children there and worked diligently throughout your life to make it into your dream home.

Whatever your home means to you, deciding how to incorporate it into your estate plan can involve some complex, thoughtful decisions, as well as tax considerations. Do you wish to keep it within the family? How long would you like to stay in the house? Would you rather sell? It is critical to proactively think about these considerations.

The risks of not planning ahead

Without even a basic will in place, California intestacy law determines the fate of your property and assets upon your death. Depending on your heirs, these laws dictate who will inherit your possessions, often in the order of spouse and children first. Without any sort of estate plan, your property must pass through probate, which can be lengthy and expensive.

Options for passing the home down

When you wish to keep your home in the family, you have several options to consider, depending on your family dynamics, tax preferences and more:

  • Co-own the home. Adding your heir to the deed can avoid probate. Yet, the gift tax implications of this can introduce complications for both parties.

  • Incorporate the property in your will. Listing your wishes in your will may not avoid probate but allows you to determine the fate of your home.

  • Create a transfer on death (TOD) deed. TOD deeds pass to heirs outside of probate and allow them to inherit the asset upon your death.

  • Transfer the property into a trust. A revocable trust permits you to retain control over your lifetime, minimize costs and avoid the probate process.

Of course, there may be sufficient reasoning as well to sell the home later in life. Whether your children have no desire to keep the home, the costs of maintenance are too great, health complications require you to move out sooner than anticipated or more, selling may hold some appeal.

If you choose to incorporate your home into your estate plan, carefully consider the tax implications of how you choose to pass it down to your heirs. Consider what is important to you, whether that includes avoiding probate, simplifying the process for your heir to become an owner, avoiding significant tax consequences or more. Work with an attorney to discuss your options and determine the most optimal solution.