QUESTION
What are the tax liabilities if we put our children on our home title? Why?
Asked on May 15th, 2015 on Taxation - Ohio
More details to this question:
We have 2 adult children and we want to try to avoid probate. What are the tax liabilities associated with including them on our house title?
2 ANSWERS
In addition to likelihood that they will fight about the ownership after you are gone, you lose the step up in basis that would avoid income taxes on the increase in value during your lifetime.
Answered on May 18th, 2015 at 6:41 AM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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The main tax considerations are involved with selling the house. Since your children don't live there, their portion of any gain on sale isn't shielded by the residence exemption. Also, if you die owning the house, they inherit at the date of death value but if you gift the house, they step into your basis, likely what you paid for the house. The bigger consideration is that if they are owners of the house, it could be foreclosed to pay their debts. For this reason, you should never give them an outright ownership in your house. If it makes sense to transfer ownership, do it through a trust. Then the kids debts can't be liens on your home.
Answered on May 18th, 2015 at 4:40 AM