Whats The Best Way To Leave Your House To Your Heirs?

Francesca Maresca, 54, of Highland Park, New Jersey, said she will have an updated will with her father, John. It wasn't until she died of a heart attack in September 2020 at the age of 89 that they learned that her sister Katherine had taken on their late mother's name for the family home, and that they were more than just a stepmother. He inherited the house. .

Shortly after the publication of the newspaper, the sisters sold their childhood home. “There were no disputes,” Mareska said. I think it's strange.

In fact, homeowners who die before deciding what to do with their property and not registering it may leave family members with an inheritance that no one wants: long legal battles over what to do with the family home and high tax liabilities. .

Read: Approaching Retirement? How to take your portfolio from growth to income.

What is the danger?

Much is at stake. Boston-based research and analytics firm Cerulli Associates estimates that between now and 2045, $84.4 trillion in personal wealth will be passed down from one generation to the next.

Most of this amount - more than $53 billion - went to people born between 1945 and 1964. Another $15.8 trillion came from people born before 1945. It is estimated that primary housing accounts for more than 70% of this wealth.

Generation X members born between 1965 and 1980 will inherit most of this transition, $29.6 trillion over the next 25 years, including $8.9 trillion over the next 10 years, Cerulli said. Every year, millennials born between 1981 and 1996 will inherit more than $27 trillion by 2045.

Numbers like these show why it's important that people take the time to decide how they want to distribute their assets, especially their homes.

Read: "We love our forest life": I am 62 years old and work full time. I have a $600,000 house on the edge of the Californian desert. Is it finally time to shrink?

Weigh Your Options

You can transfer a house or other property while you're still alive, but the downside is that your heirs will sue or break the law, says Lazaro Cardenas, a real estate attorney in Freehold, New Jersey. The problem is, real estate can be bought if it is not properly managed.

In addition, parents can deduct mortgage interest from their tax returns if they sell their home to their child or children.

However, selling your home can provide money for nursing and other medical expenses you may need throughout your life.

“One of the benefits of owning property in a will is that you can control your home until you die,” says Cardenas of Patel & Cárdenas. “The downside is that end-of-life care is expensive and usually not covered by insurance.”

See : $3,000 a week? High costs of caring for the elderly, which no one warns you about.

Cardenas added that the agency can consider your home an asset if you applied for Medicaid for end-of-life expenses and sold it to heirs within the last five years.

“One solution is to sell your property to your children, but make a document that says you can stay in the house until you die,” Cardenas said.

Don't Miss: 'Sorry': Dad wanted to share my late mom's house with the whole family, but overfunded it. What help can I get?

Think Faith

Another option is to transfer the property to trust management. This way, when you die, the assets will go into the trust and the house will be owned by the trustee. The advantage here is that the heir does not have to go to court after the death of the last parent, Cardenas explained.

“As a result, you can leave your assets to one child, to all your children, or to no one at all,” he said. "But in a state like New Jersey, you can't disinherit a spouse."

Robert "Bob" Kibler, a Green Bay, Wisconsin, certified public accountant who handles large sums of money with clients around the world, advises parents to anticipate potential disputes and create separate trusts for each child.

“Attorneys bring in auditors to keep accounts right so they have a clear idea of what the client wants to achieve financially,” Kibler said.

Possible risks

He gave an example of a case where a man wanted his business to go to one of his children and the other child received an equal amount of property.

“In this case, child A should pay less in business to mathematically equal what B earns,” Kibler said.

But other questions are more difficult. For example, children from a first marriage may have problems with their stepfather or stepfather's children.

“As a CPA, we do tax deed and settlement calculations to rule out the lowest tax rate situation for the entire group,” Kibler said. “We have clients who help us while they are alive, but sometimes they come to me after a person has died, when people realize what happened to them.”

One of the most important decisions that a person makes is whether to give him his property during life or after death.

Benefits of giving

“Gifts are useful for a lifetime,” Kibler said. “This is accounting and you need to work with your accountant to define your goals and structure your estate in the best possible way.”

He adds that giving real estate to your heirs during your lifetime can lower your taxes.

Inheriting money or other property, even with wills and trusts, can be emotional.

Jacket M. Timmons, president and CEO of Sterling Investment Management in New York, said whoever inherits a house or a lot of money often takes on more responsibility. “It’s sad that if this person hadn’t died, you wouldn’t have this house and money,” he said. "Many people want to make sure they are good stewards of what they leave behind."

Timmons advises his clients to wait at least a year before making a major decision to sell a home. “Time and distance bring clarity,” he said. “But I admit that waiting before making a decision is the privilege of a very few.

Instead of worrying about death when dealing with wills and trusts, Timon encourages his clients to treat these legal documents like an inheritance.

See also : What will happen to my youngest daughter if I die before I turn 18?

Leave a legitimate love letter

“When someone takes the time to put together an estate plan and communicate their wishes, it's a great gift for the people they're leaving behind,” Timmons said. “They don't have to worry about putting everything together. You can leave your loved ones with a complete roadmap of what you want to do. This is the love letter you left for me."

In Maresca, he and his sister spent two months cleaning their inherited home in Saddle River, New Jersey. Most of the content involved. The three-bedroom, one-bath home went on sale in November 2021 and the sisters had 40 offers.

“We chose 10 minutes,” Maresca said. "We had several vacancies: an investor providing funding." After the sale closed on December 21st, they split the profits equally.

Mareska said the experience taught her the importance of communicating your desires to your child and building trust on her behalf.

Carmen Quesido received her bachelor's degree from Rutgers University and her master's degree from the Columbia School of Journalism. Her work has appeared in Newsweek, Oprah Daily, Refinery29, Health, NBC, CNN, NPR, Cosmopolitan and more.

More from Next Street: