Things To Know About Transferring Your Homestead To Your Children

Many people wonder if they should transfer their primary residence to their children before they pass away. Generally speaking, the answer to this question is a resounding ‘No!” Your primary residence has a homestead designation in Florida. This homestead is applied to ensure that it provides you with certain benefits, as well as certain limitations.

For example, a homestead designation ensures creditors cannot seize the property, essentially leaving you without a place to live. Still, many people think it is practical to transfer their home to their children before they pass away. Below, our St. Petersburg estate planning attorney outlines why this is a mistake.

Why Do People Transfer Their Homestead to Their Children? 

There are two main reasons people choose to transfer their homestead to their children. The first is that many people are worried that if they do not, the state of Florida will keep the residence after they pass away. The second reason is that they want to help their children avoid probate after their death.

First and foremost, it is only in very rare cases that the state keeps property of deceased individuals. Even if you do not have an estate plan when you pass away, the intestacy laws will apply to your estate. This means that your closest loved ones will receive your property, including your home. Secondly, while transferring your home to your children will protect them from probate, it leaves both of you vulnerable to other risks.

Loss of Homestead Protections 

When your home is classified as a homestead, there are many protections in place for the primary resident. One of these is that creditors cannot seize the home to recover an unpaid debt.

If your children do not live with you, the home is not considered a homestead for either of you. If your child has unpaid creditors, they can seize the property because it is not their primary residence and because you transferred the title, it is not your homestead. Even if your children currently live with you, there is always the potential for them to move out and so, you would face the same problems.

Taxation on the Property 

If you give your child your home, they may or may not face tax implications, depending on the manner in which you transfer the property to them.

If you gift the home to your child, they will have to pay taxes on any increased value in the home if they choose to sell it after you pass away. For example, if you purchased the home for $100,000, that is their tax basis. If the property is worth $500,000 when you pass away and your child wants to sell the property, they will first have to pay $400,000 in taxes on it.

On the other hand, if your child receives the home as an inheritance after you pass away, the tax basis increases to the fair market value of the home. As such, your children would not have to pay any taxes on the home.

Our Estate Planning Attorney in St. Petersburg Provides Sound Legal Advice 

There is a lot to think about when creating an estate plan, which is why you should always work with a St. Petersburg estate planning attorney. At Legacy Protection Lawyers, LLP, our experienced attorneys can answer your questions and help you draft the plan that is right for you. Call us now at 727-471-5868 or contact us online to schedule a consultation and to get the legal advice you need.

Source:

floridarevenue.com/property/documents/pt113.pdf