Transfer a House to Children Now Instead of At Death

If clients have a house that their children are eventually going to inherit anyways, it might be a smart move for them to go ahead and transfer the property to their children. This transfer can reduce the size of their estate by removing the asset and any possible increase in value.

Clients should consider an income tax benefit that could fall upon the children though and weigh it against the benefits of a transfer. If the house has appreciated and the children plan to sell it right after the transfer, then the children would have to pay capital gains taxes on the house. It is also important for clients to be comfortable engaging in business relations with family members.

Financial Advisor Magazine also recommends discounting the value of any real estate given away. There are several options for achieving this including partial interests, grantor trusts, qualified personal-residence trusts, and setting up a legal entity.

See Deborah L. Jacobs, Making the Move, Financial Advisor Magazine, March 2011.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.