Methods to Pass Your Home to Your Heirs

Many Florida residents plan to leave their home to their children. There are a variety of ways to pass your home to your heirs. Careful consideration of each method is vital, since each method has legal and financial ramifications, and may also impact on your long-term care planning.

1. You can deed your home to your child, giving you and your spouse the right to live there for the rest of your lives (a life estate).

Advantage: Your child will own the home when you pass on.

Disadvantage: You give up control. If you ever wish to sell your home, you will need your child's permission. If you do sell, you will be entitled to a percentage of the proceeds based upon the value of the life estate.

Disadvantage: If you ever need to apply for Florida Medicaid for long-term care, Medicaid may consider the proceeds you receive to be a gift, which may negatively impact on your eligibility for a period of time.

2. You can make your child co-owner of the property - i.e., joint tenant with right of survivorship.

Advantage: When you pass away, your child will automatically inherit the home.

Disadvantage: Again, you have lost a degree of control. If you ever wish to sell the home, you will need your child's consent. If the house is in fact sold, you will be entitled to half or less of the proceeds, depending on the percentages you and your child own.

Disadvantage: Your ability to get Medicaid in Florida long-term care benefits may be jeopardized for a period of time because of the monies you receive if you sell your home.

3. You can place the house in a living trust (also known as a revocable trust or inter-vivos trust).

Advantage: You will retain full control over the property while you are alive. Your child will inherit it after you pass on.

Disadvantage:It may be difficult to secure refinancing of your home should you ever wish to do so.

4. You can gift your house outright to your child.

Advantage: You and your child may derive satisfaction knowing that this is a "done deal," with no strings attached.

Disadvantage: Your child now has full control over the property. Technically, he/she has the right to sell it or do anything else with it, without your consent.

Disadvantage: You will lose your Florida homestead exemption which would otherwise decrease the assessed value of your home for property tax purposes by $50,000.

Disadvantage: If your child does sell the house while you are alive, he/she will have to pay capital gains tax. If you had sold it, you would have been titled to a $250,000 capital gains tax exclusion for the sale of your primary residence.

Disadvantage: If your child sells the home after you die, your child will lose the step-up in basis and will have to pay capital gains tax based upon the original purchase price.

Disadvantage: If you apply for Florida Medicaid benefits for long-term care, the transfer of your home to your child may be considered a gift and may disqualify you from receiving benefits for a period of time.

5. You can place the home in an enhanced deed (ladybird deed), which gives you the right to remain in the home for the rest of your life, as well as the right to to sell it or give it away during your lifetime.

Advantage: Your child will automatically inherit the home when you pass away.

Disadvantage: You may face obstacles if you want to sell or refinance the property, since some lenders and title insurance companies are uncomfortable with this arrangement.

6. You can include a provision in your will leaving the house to your child.

Advantage: You remain in control of the property while you are alive.

Advantage: The property will go through probate and pass to your child when you die.

Disadvantage: The probate process can be expensive, time-consuming and inconvenient for your heirs.

Each of these methods must be examined within the context of your specific estate planning goals, and family and financial circumstances. Be sure to discuss the matter with a Certified Elder Law Attorney to determine the strategy that is best for you and your family.

Florida Attorney Joseph S. Karp assists residents of South Florida and their families with estate planning, wills and trusts, probate, planning for long-term care, Medicaid planning, Veterans benefits planning, special needs planning, special needs trusts and trust administration. The Karp Law Firm has offices in Boynton Beach, Palm Beach Gardens and Port St. Lucie, Florida. Find out more by visiting http://www.karplaw.com or calling 800-893-9911.