Estate Planning Issues Can Arise When Putting Child On Home Title
When parents plan their estate, they usually want to make sure their children receive most of their important assets, such as any real estate they may own. Some may ensure this by putting the title of the family home in their adult child’s name. However, estate planning may not be quite this simple in Florida or in any other state. Parents who put their adult child’s name on the title of their home may inadvertently cause unnecessary problems for their heirs.
The potential problem surrounds possible tax liabilities when the adult child heir decides to sell the home. For tax purposes, the cost basis for a person selling a home will include the cost of buying the real property as well as other capital improvements made to the home over the years. With the fall of home prices resulting from the real estate bubble, it is possible that an individual’s parents put more money into a home than what the heir would receive from selling the property. This means the heir will not have to worry about any federal income tax liabilities.
On the other hand, if a person’s parents’ cost basis for the real estate property is considerably low and the current market value of the real estate is relatively high, the heir may end up owing federal income taxes on the sale of the property. When an individual’s parents puts their adult child’s name on the title, the parents are gifting their adult child an interest in the real estate. However, this also means the adult heir will also share in the cost basis of the property for tax purposes.
It is important for parents considering putting an adult child on the title of the family home to research the tax implications of this estate planning decision in Florida. This means the parents will need to look into any new laws which could affect tax liabilities and estates. However, ultimately each situation is different and decisions about estate planning should be made with consideration to the specific circumstances.