Planning for the family’s immediate and long term future is something all parents undergo at some point. Deciding what to do with your assets in the case of your death is simply one more step in this procedure. Because your home is likely the largest purchase you will make during your life, deciding what to do with it’s rather important. The home may be left to your kids in your will, or you can transfer ownership to them through a deed before you die.
Quit Claim Deed
As a property owner, then you have the right to transfer ownership to another person. Generally, transfers between parents and children are considered gifts — unless the child actually purchases the house from you. A quit claim deed may be used to finish the transfer. It is ideal to hire an attorney to prepare the deed to you; however, quite a few internet resources are accessible sample deed forms. You need to sign the completed deed in the presence of a Notary Public and record it on file with the county clerk or recorder.
Vesting
You have the choice to stay an owner, or transfer all of your ownership rights to your kids using the quit claim deed. If you decide to stay an owner, you are listed as the grantor and your children plus you are listed as the grantees. You have to choose how you wish to hold title, also referred to as the vesting. Various methods of co-ownership are available such as joint tenancy or tenants in common. Joint tenants each own equal shares of the property with rights of survivorship. If one owner dies, then another owner automatically retains full ownership rights.Tenants in common can own unequal shares of the property, and do not have survivorship rights.
Tax Considerations
You have a few different tax obligations to take into account. First, a transfer tax might be imposed on the deed transfer. Most places offer exemptions for parent to child dealings, though. Second, the transfer might warrant a reassessment of the property’s value for real estate taxes. The State of California provides an exception from this reassessment for parent-to-child deeds. Third, the federal government imposes a gift tax on transfers like this. The donors are responsible for paying the tax on the value of this property. In the time of publication, the annual exemption from the present tax was $13,000 for single people and $26,000 for married couples filing jointly.
Other Considerations
Deciding to transfer your home to your kids while you are still alive is a significant choice. Should you transfer ownership to them outright — meaning you are no longer listed on the title — you have no rights to stay on the property unless they permit you to be there. Although it would be an unfortunate scenario, your child could turn around and sell the house that would force you out. Before deciding to do this you should consult with an estate planning attorney to explore all of your options.