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Location: In the North Idaho woods, still surrounded by terriers
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My eldest grandson is soon to be 18 and I am changing my will so that if something happens to me (when something happens, I suppose) whatever home I am in at that time will go to him. Should I put his name on the deed/title when he turns 18 or just designate him as the beneficiary in the will? Which would cause less mess when the time comes?
Esselcue, you probably want to talk to your accountant so that your grandson doesn't end up with an unexpected tax liability. There are a number of ways you can handle it that would get the job done - you just want to be sure that it's the best for you and your grandson when it comes to the tax consequences.
Location: In the North Idaho woods, still surrounded by terriers
2,179 posts, read 7,016,755 times
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Yeah, that's what I was worrying about...the tax situation. I "heard" that if the benefactor is already on the title/deed, they are not taxed but I suspect that is not completely true. I also am not sure that an 18-year-old can legally own Real Estate. I think so...but not sure. Thanks Gretchen!
Normally there is a "stepped-up basis" when a person inherits a property, meaning that the person receives the property at the current fair market value (vs the original basis in the home). I think you could run into tax issues for your grandson if you put him on the title now, as he would become an owner of the property now and would be liable for property taxes, etc. Also, if the property was sold before he becomes the sole owner of it, he'd probably be subject to capital gains tax on his portion of the profit. And if the property value increases substantially before he becomes the sole owner, I'm guessing he'd have a tax consequence when he receives the property. The other unknown is what will happen with the tax laws. As I understand it, if Obama is elected he has proposed eliminating the $250k/$500k tax exemption on primary residences.
Lots of considerations, and ones that are specific to your/your grandson's individual tax situation now and future. Esselcue, if you'd like the names of a few good tax/estate planners in our area, please send me a DM.
The receiver doesn't have to pay taxes on gifted property, so he won't end up with having to pay estate taxes. However, your estate may have to pay taxes, and if so, will either have to liquidate other assets or the house to pay them (if any are due).
Yes, 18 year olds are can own real estate in the US. However, he will have to pay electric, gas, sewer, water, taxes, and insurance. He may sell the house if he cannot afford these expenses. (I couldn't at 18).
The only other thought is does your grandson want to own real estate in general and this house in particular? 18 is awfully young - he has college to look forward to, he has a chance to move to a different town, he has opportunity in front of him. A house will tie him down, and be a heck of a lot of responsibility for an 18 year old. I'd make sure that he wants your house and wants the responsibility.
My eldest grandson is soon to be 18 and I am changing my will so that if something happens to me (when something happens, I suppose) whatever home I am in at that time will go to him. Should I put his name on the deed/title when he turns 18 or just designate him as the beneficiary in the will? Which would cause less mess when the time comes?
Oh, if you put his name on the deed when he turns 18, then you get hit with gift taxes right away. They're not due until death but it's considered a gift and you'd get hit with gift taxes.
Also, if you put his name on the title, he would be an owner of the house and allowed use it as his. In other words, he would be allowed to sell stake, to use it as colleratal for a loan, move in, or move his friends in, or move his girlfriend in. So I'm not sure that would be very wise unless you're ready to lose control over your own house.
Designating him as the beneficiary would be the easier way to go.
Location: In the North Idaho woods, still surrounded by terriers
2,179 posts, read 7,016,755 times
Reputation: 1014
Thanks to everyone! My intent would be to allow my grandson to sell it or whatever he wants to do with it...I doubt he would want my home, per se (although one never knows), but he would certainly have the option of selling it if he chose. I did contact a tax attorney (thanks Gretchen!) and was advised that a life-estate is the way to go (thanks CAugust). Of course, since I plan to live to be 110, which will make Codi in his 60's by then, it's all moot...right? LOL
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