Should I Put My Home in my Children's Names?
Probably not. This is an action that is taken by a large number of people. Unfortunately, most people that undertake this action do not fully understand the consequences of either putting their children's name on the deed with them or, in the alternative, deeding the home to the children.
If such an action is going to be taken, it is very important that you understand both the risks and the consequences of making such a transfer.
First, the benefit of deeding the home to the children would be an avoidance of Pennsylvania Inheritance Tax. If you survive this gift by one (1) year, your children would not be obligated to pay the 4.5% Pennsylvania Inheritance Tax. What this means is that if you had a home, valued at $100,000.00, there would be a savings of $4,500.00 in Pennsylvania Inheritance Tax.
This same type of transfer may also provide protection in the event that either parent required Medicaid. However, this transfer to the children would need to take place at least five (5) years prior to the need for Medicaid. If the transfer to the children was made within five (5) years of the application for Medicaid, the applicant would be deemed ineligible for Medicaid.
The potential negative consequences of deeding the home to your children or, in the alternative, putting your children on the deed with you include opening the home up to the creditors of your children. If both you and your children own your home, any creditor of your child can file a lien against your home.
For example, if your child was involved in an automobile accident and did not have sufficient insurance coverage, the injured party would have a right to pursue your home in order to satisfy their damages sustained from the automobile accident. In addition, if your child would pass away before you, you would be required to pay inheritance tax on your home given that your child's share would revert back to you. The Inheritance tax would be 4.5% of the value of your child's interest in the home.
Given these potential problems that exist when a home is transferred from parents to a child, we typically will not recommend that this action be used for Estate Planning purposes.
If you are interested in scheduling an appointment to discuss how to save taxes or to prepare Estate Planning documents, please call our office at 724-836-3300 or use our contact form today.