Whether your home is a legacy left from a previous ancestor or one you just bought and want to hand down to your children, the house is a special place and one you want to keep in the family. You could leave it to your child or children in your will, but are there other ways to be sure the house goes to your children and isn’t sold or gobbled up by estate or property taxes?
There are, but you need to start planning for it now. It’s never pleasant to think ahead to your eventual death, but you need to think ahead if you want to be sure your kids get your house when you’re no longer here to tell the court what you want. If you have immediate questions, go ahead and reach out to us today. We’re here to help.
Gifts, Revocable Trusts, and Life Estates
Property law is filled with archaic, medieval terms like “fee simple,” “life estates,” and “reversion.” Back then, the terms had to do with who owned the land and who could live on it. Today, we use them to define who has title to property now and in the future.
When planning your estate, one thing you need to decide is whether you intend to continue living in the house or whether you plan to move out at some point. This will let you and your attorney, if you decide to consult one, make the best decisions about how to transfer your property.
- Gift. The easiest way to ensure your home is transferred to your children is to give it to them as a gift. Iowa has no gift tax, but there is a federal gift tax on property that must be paid by the recipient. Gifting lets you continue to live in the property until you choose to leave, at which point the gift becomes the property of whoever you gave it to. This tax, the capital gains tax, is on the appreciated value of the property, if any, and it can be expensive.
- Tenants with right of survivorship. You are allowed to take title to property as “joint tenants with right of survivorship.” Your attorney can explain this phrase in more detail, but it means that if you enter into this type of title with your kids, you and your children all own the property equally. When you die, the property immediately passes to them without the need for a will or trust. There are significant downsides to this method, the greatest of which is the lack of division of property. Still, it avoids probate, and if you want to ensure the property goes to your children without delay, this will ensure it.
- Living or revocable trust. The most complex but safest route is to consult an estate planning attorney and draw up a living trust. As with titling the property, a trust bypasses probate by taking effect immediately upon your death or incapacity. Unlike a will, trusts need not be probated since the trustee is tasked with immediately distributing property, including all real property. In a trust, you can specifically detail which property is to go to which individuals. Your children can take title immediately, although they will have to have the property titled in their names. You can also leave property to minor children since a trustee can be designated to hold the property on their behalf until they reach a suitable age.
Even if you decide to handle your estate plans yourself, it is best to discuss them with an estate planning attorney. Your attorney can explain your options and go over the pros and cons of each alternative. It is also a good idea to have an attorney review your living trust before you sign it, to be sure that everything is included and properly listed. Some types of property transfer and powers of attorney require legal language to be binding on the agent. It’s a good idea to have someone who understands this language make sure you did the right things, so go ahead and contact us today.
Contact a Cedar Rapids Estate Planning Lawyer for Help Today
If you are considering estate planning and have a home you want to protect, or you have any questions about your will or trust, contact the Cedar Rapids estate planning lawyers of Arenson Law Group, PC at (319) 363-8199 and talk to one of our attorneys. We can help you review your options and make the best decisions for the disposition of your property and the protection of your loved ones.