Leaving a Home for children/grandchildren

Forum|Forum|1 year ago
June 26, 2024
2 replies
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We are trying to set up our will and leave our home for our children. If we put them on the deed (title) can they assume our VA loan with the money we left them and what taxes (other than what is included in the escrow might they incur? We want to put the least liability we can on them upon our passing.

Ask the Experts - Retirement II - June 2024

TeriH

You want to ensure you do not put them n the deed until your death. Reason being, if you do it before, it will be considered a gift and they will inherit your basis in the property. Where as if you wait, it will be considered inheritance and they will get a step up in basis to the fair market value at the date of death.

Assuming, it's a death, it will be a straight transition from you to them. A deceased person's mortgage becomes the responsibility of the person inheriting the home. The heir has several options such as moving into the home and assuming the mortgage, buying out other heirs if they also inherited a portion of the property, or selling the house and using the proceeds to pay off the mortgage.

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SedutraAuthor

I don't understand this. How could we possibly put them on the deed after our death and what does "a step up in market value" mean? We have an extremely low mortgage rate. We have to have means to allow them to live in the house or sell it. I do have an attorney but it seems there are tax issues I need to resolve before he can complete the will/trust. We just want them to be able to keep the home.

TeriH

Your will should state , at death, they inherit the house. you would have that set up before hand, with any other instructions.

If you "gift" them the house, prior to death, their basis in the house is your basis. So, if you purchased it for $100k, that's their basis. But, if they "inherit" the home, their basis is the fair market value at the date of death. So, let's pretend the fair market value is $500k. If they sell if on that day for $500k, there would be no tax owed. If they sell it if it was a gift, then tax would be owed on $400 ($500 - $100).

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