A home is often the most valuable asset in your estate, so when it’s time to start thinking about estate planning, what to do with your home will be one of the biggest matters you consider. In addition, discussing your intentions for your property with loved ones is also necessary to ensure your wishes are understood.
While there are several estate planning strategies for your home that can help make the transition easier on your family, estate planning for your home remains a potentially complex and emotionally-charged matter. Simply put, estate planning for your house is anything but simple.
WHY ESTATE PLANNING FOR YOUR HOME IS VITAL
Think about that door frame where you measured your child’s height as they grew. The kitchen table where you talked as a family about your day. The bedroom where you wiped your daughter’s tears. A home is more than bricks and mortar, and it’s more than GPS coordinates: it’s a touchstone for your family history. And chances are it has enormous emotional value to your family.
When stressful life events happen, like the loss of a loved one, emotions are heightened, and things can get complicated. This is especially true when it comes to the estate, and in particular, your home. Having a plan in place for such a complex asset, intertwined with so many emotions, will go a long way toward easing your family’s grief journey. But there are other, practical reasons to make sure you have an estate plan in place for your home:
Your heirs may be eligible for tax benefits if they sell the property. Typically, the home would be taxed for the property value at the time of death (or sometimes an alternative date is permitted). But if an heir tries to sell the property to a sibling, those tax benefits could evaporate, as they usually don’t transfer.
Navigating how to handle debt when a home transfers to heirs can be difficult. For example, if there is a mortgage loan balance, it may become due at the time of death. This could leave your loved ones with a burden of debt that has to be paid off with other assets. Alternatively, they may have to qualify for a mortgage loan or sell the property.
FEES AND EXPENSES
If your heir chooses to sell the property, they could incur fees and other expenses. And if the property value exceeds tax exemption limits, they may face an unexpected tax bill from the state or federal level.
YOUR PROPERTY AND YOUR HEIRS
Transferring ownership of your home to your heirs will likely be part of a comprehensive estate plan. If you don’t have a plan, your property will probably go through probate, which can be a long, slow process. But by putting an estate plan in place for your home, you can rest assured your wishes will be followed and the stress on your loved ones will be minimized in the midst of their loss. Talking with a qualified expert can ensure there is a road map for the future of what is likely your most valuable asset.