Widowed for the past decade, you’re grateful to have been able to keep up the management of the beautiful home where the two of you raised your children. Your hope is to live out the rest of your years there, but in the process of organizing your estate plan, you’re considering options for passing ownership of the property to your two adult children. Neither your son nor your daughter wants to actually move here to Indiana, but you’re thinking of transferring half ownership to each while you’re still alive. That way, just in case of a medical setback that would force you to move, there would be no immediate need to prepare the home for selling.
You should definitely consult an estate planning attorney. Transferring a home to your children during your lifetime (as opposed to naming them beneficiaries in your will or trust) may not be such a good idea, as Greg Daugherty points out in Investopedia. Assuming your home has greatly appreciated in value over the decades, when you die while still owning the home, there would be (under current tax law) a “step-up in basis“, avoiding a large capital gains tax liability for the heirs. That advantage would be lost were you to transfer your home to your children now.
What’s more, transferring ownership of your home to your children can prove a negative if you ever have the need to apply for Medicaid. (If your home was transferred within five years of applying for Medicaid, you would be deemed ineligible because you would have given away assets which could have been used to pay for your care).
You might wish to consider taking out a reverse mortgage as a way of establishing a source of growing wealth earmarked for your children. Although the process would entail some upfront costs, whatever portion of the equity you do not withdraw will continue to grow tax-free. Should you be forced to move out of your home permanently for medical reasons, your children would have six months plus possibly two ninety-day extensions to either sell the home (or satisfy the loan with their own funds).
It may not be practical for your children to inherit your home, but your housing wealth can be a welcome part of your legacy to them.
https://mutualreverse.com/david-garrison
Readers, if you’d like to see what you might qualify for with a reverse mortgage in Indiana, or to download your Reverse Mortgage Guide Click Here (and scroll down).
Borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees. David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.orgEqual Housing Lender