What are the ownership and tax consequences of gifting my home to my child during my lifetime?
By Steve & Kiley Stuchlik, Attorneys at Law
Last month, we mentioned that one should not engage in DIY estate planning through the execution of deeds to make a lifetime transfer of real property without first obtaining the advice of an attorney. We noted that there are ownership and tax consequences to transferring title to real property. Many parents of adult children ask us about simply deeding (gifting) their home to their children during their lifetime as a way to avoid probate and/or avoid the state putting a lien on their home for the cost of the parents’ medical care (e.g. Medicaid).
While those objectives may be accomplished, there are many consequences to a lifetime transfer of real property such that in most cases, gifting your house to your child now, via execution of a deed and without payment of a fair purchase price, is NOT the best option. While some states, such as Oregon, allow for a transfer on death deed meaning that the property is not transferred during the owner’s lifetime but rather, the transfer occurs automatically upon the owner’s death to the person designated in the deed, Idaho does not allow for a transfer on death deed.
The only circumstance when deeding your house to your child during your lifetime without payment of a fair purchase price is an ok option is when all of the following facts are true (and even then, a person should seek competent legal and tax counsel before proceeding):
And now for the reasons why deeding the house to your child during your lifetime without payment of a fair purchase price is most likely not the best option:
If your circumstances are such that gifting your home is an ok option, then you should consult competent tax and legal counsel to assist with the transfer. If gifting is not an ok option for you, then you should consider consulting with legal and tax counsel to engage in estate planning in order to pass your home onto your children without the potential ownership and tax consequences of a lifetime gift.