Yes, it is possible for an individual to transfer real estate assets to their children. When an individual transfers property to another individual, it is referred to as a conveyance.
A conveyance can be made using a deed, title, or lease. These documents detail:
- The purchase price;
- The transfer date; and
- Any obligations and responsibilities for the parties to complete the transaction.
There are numerous different ways an individual can transfer real estate assets to their children, including deeds and estate planning. If an individual is considering transferring a piece of real estate to their children, they should consult with an attorney to determine the best method for their needs.
Is it Important to Plan Ahead?
One of the most important steps an individual who wants to transfer real estate to their children can take is to plan ahead. This can help ensure that there are no issues with the property and the transfer will be legally valid.
What Are the Methods for Transferring Real Estate Assets to Children?
One way an individual can transfer a real estate asset to their children is called a transfer on death deed. With this type of deed, the current owner signs it over to the new owner before they pass away.
When they do pass away, the deed automatically transfers ownership to the new owner. Another way an individual can transfer property upon their death is to create a will.
With a will, when the inheriting family member passes away, the individual who is inheriting the property is required to bring a copy of the will as well as the death certificate to the county recorder’s office for filing. Once these documents are filed, a clerk will update the deed to reflect the new owner.
If an individual passes away without a will, their property will be divided among their heirs according to the laws of the state in which they resided or where their property is located. This is referred to as dying intestate and may result in property distribution that does not align with the deceased’s wishes.
If an individual wants to transfer the property before they pass away, they can use one of several types of deeds. Deeds are legal documents that are used to transfer ownership rights in a piece of property from the current owner to a new owner.
Deeds are typically used to transfer ownership during the purchase or sale of a home or when an individual inherits property from one of their family members. If an individual receives a property deed, it is very important that they record it with the local county recorder’s department where the property is located.
Failing to record the deed may lead to serious consequences.
What Are Some Legal Considerations When Transferring Real Estate Assets?
When an individual’s will is subject to probate, the validity of the will and the deceased’s instructions are determined. Probate is often a very time-consuming and costly process.
Because of this, many individuals choose to transfer their property to their heirs outside of their will. There are many ways a real estate transfer can be done, including:
- Living trust: Adding an individual to act as a trustee on their property before death through a living trust can be complicated and costly, but the work is done before the death of the property owner;
- This transfer process is also less complicated than probate;
- Co-ownership: Adding an individual to the ownership of the property before death is a way to avoid probate and transfer real estate through a will;
- Tenancy-in-common, joint tenancy, and tenancy-by-the-entirety are methods of co-ownership that transfer property legally from the deceased party to the living one; and
- Life estate: Setting up a life estate is another way to transfer real estate to another individual after death. This gives the grantee, or original owner who is giving the property, access to it for as long as they are living. The life estate terminates along with the life of the estate holder.
Can I Gift Real Estate Assets to My Children?
Yes, an individual can gift real estate assets to their children. One common way to do this is to set up a revocable trust, or a living revocable trust, to avoid having the value of a gift being included in their gross estate. This is a type of trust which is created by an individual, called a settlor, during their lifetime.
If an individual is considering gifting a real estate asset to their children, they should consult with a lawyer to learn about the possible tax implications for both parties.
What About Trusts and Estate Planning?
Trusts and estate planning are important ways an individual can help the future of their loved ones. A clear estate plan can reduce their heirs’ tax obligations as well as the need for probate court proceedings. As noted above, if an individual does not have an estate plan, their estate will be distributed according to the intestate succession laws.
This means that it is unlikely that the individual’s property will be distributed as they wished. In many cases, a court may try to split up real estate holdings, which can result in the sale of a family residence instead of the property being passed in whole to one heir.
Are There Any Potential Pitfalls to Avoid?
It is important to note that there are pitfalls to avoid when transferring real estate assets to children. One issue to consider is the gift tax.
A gift tax is the federal tax on gifts that are paid by the individual making the gift. At this time, an individual can give away $17,000 per year.
This number, however, may change each year. Gifts may include cash or assets.
This tax was implemented to prevent individuals from avoiding the federal estate tax by giving away all of their assets prior to their death. This means that if an individual gifts a piece of real estate to their children, the first $17,000 will be excluded from taxation.
Gifts that are made during the lifetime of an individual are called an inter-vivos gift, or a gift between living individuals. The individual who makes the gift must pay the tax.
Under federal tax laws, if an individual makes a gift of property within 3 years of the date of their death, the value of that gift will be included in the value of their gross estate. The gross estate is the dollar value of their estate at the time they pass away.
Should I Discuss the Possibility of Transferring Real Estate Assets with My Family?
If an individual is considering transferring real estate assets to their children, it is important to discuss the potential consequences of that transfer. This is because there are taxes and fees associated with owning property, such as property tax and mortgage payments, that the recipient may be required to make.
In the event that the recipient cannot afford to make these types of payments, they may lose the property to foreclosure. There may also be other issues, such as if the recipient resides in a different state and does not want to travel to keep up the property.
Should I Consult with a Lawyer?
If you are considering transferring real estate assets to your children, it is essential to consult with a family law attorney to ensure that the transfer follows all of the laws and requirements in your state. Your lawyer can help you draft or transfer a deed.
You can also consult with an estate planning attorney who can help you determine which type of transfer is best for your unique situation. Your lawyer can help you draft a valid estate plan in your state and help ensure that your property is transferred to your children as you desire.
