Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 month ago

Generally speaking whats the cheapest/best way to transfer/leave a house to grandchildren that are above 18 years old, (two grandchildren)?

would it be best to just make a will? Or try to get them on the title of the house or the mortgage? I'm looking for the best thing least financial cost to them.

And if leaving the house to them through a will is their any hidden cost they need to watch out for?Just looking for a general direction obisouly every situation is different.

Update:

Thanks for the replies should have included the location its California 

13 Answers

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  • Deed upon death in California.

  • 1 month ago

    It is better for them financially if you leave it to them in your will.  If you give it to them while you live, there is no tax for them and probably not for you (but you may be required to file the gift tax return; your lifetime estate exemption would cover that for most people).  But their cost basis in the property for the purpose of determining the taxable gain when they go to sell is YOUR cost basis.  If they inherit, they do so at a stepped-up basis, the value of the property at your death. That is MUCH better for them.

    The 'hidden cost' in receiving property via inheritance is that you suddenly have tax and insurance and maintenance and repair expenses you didn't have before.  And, of course, for them to inherit property at all, it must be free from encumbrances such as mortgages or other liens, and you - or your executor who manages your estate - must have sufficient cash or other saleable assets to pay all estate debt or the property may have to be sold.

    An exception is that if there is a mortgage on the property, the grandchild CAN take over the payments. The bank cannot call the mortgage due and payable, under the Garn-St Germain Act.

  • 1 month ago

    When you die, the home automatically and immediately transfers to the person(s) you named as beneficiary in the deed. If you include the words Joint Tenant with Right of Survivorship in your deed, you and whoever else is on the deed are co-owners of your home. However--check with your lawyer--it may or may NOT be possible to do that in your state. Every state has different laws. While your estate is being probated, the mortgage payments will still be due and payable--so let them know they can't just OWN the house after you pass--it will still have to be paid for. 

    That will be the cheapest way to do it. They will owe whatever is left on the mortgage plus your taxes and insurance. 

    Your children may also owe an inheritance tax on the property if yours is one of the six states that tax inherited property or cash--and usually this is only paid by the beneficiaries if the estate is over $11.58 million dollars. In other words, very few people pay one--but your lawyer will be able to tell you how to avoid having your beneficiaries pay it, if they end up taxing it. 

  • 1 month ago

    You wont't get them on a mortgage.  Can't put them on deed without refinancing.    The mortgage will need to be satisfied upon your death, that is the cost they will come across.  You need a will, consult an attorney.

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  • 1 month ago

    I'm assuming this is a USA question.  if you will it to the children then there is no gift tax up to about 11 million dollars, so I assume no gift tax implications.  

    However, if you have a large capital gain on the house (ie you bought it for maybe 100k, years ago, and now its worth 300k). Then the children now receive the house at your basis (this didn't used to be the case, but its the law now). So, they now have a 200k capital gains to pay tax on. If they live in the house for 2 years then they can get an exemption of this capital gain up to 250k each (500k exemption if they both live there 2 years) and thuse they can avoid capitals gains on the sale altogether.  

    If they don't want to live in the house then they will have to deal with the capital gains. The tax on that can be 15-20% if they hold the hosue a year, or even more if they don't.  They could possibly even avoid this capital gain (for now) but doing a starker exchange (aka a 1031 tax deferred exchange) and buying a new house with the proceeds from the sale of the original house.

    My advice is to just will it to them.  If there are large capital gains then suggest they live in the house 2 years, or 1031 exchagne it to avoid the gains or at least wait a year to sell it to get the lower capital gains rate. Or they can simply sell it and pay the capital gains if they can't wait the 1-2 years.

  • Maxi
    Lv 7
    1 month ago

    Generally speaking you need to know the law where you live........ So 'generally' where I live Wills need probating, inheritance tax needs paying, people already on the title get the property without it becoming part of the estate, gifts given to others now are limited in value, a property gifted to children/grandchildren needs you to live 7 years afterwards before inheritance tax doesn't require paying............... so 'generally' go and see  a legal adviser who can tell you for the country you live in what is the cheapest option

  • 1 month ago

    Depends where you are but in Britain if you leave anything to anyone that isn't your spouse or child then it's subject to inheritance tax and they may have to sell or remortgage to pay the tax unless they can pay out of their savings. It's not a hidden cost, it's a well known cost. To make sure they are not taxed you would have to give them full ownership now and you be a tenant, legally but then what if they fall out with you and chuck you out before you plan on dying? Unlikely as it may be they could. Ignore that other person though, a will says what you want to happen and it can't be argued with, probate is just a formality and the will stands. It's not expensive to have a solicitor prepare a will making sure it's watertight neither, it costs about the same as a new smartphone, or the same as the legal fee when you buy or sell a house.

  • 1 month ago

    A will is not cheapest or best because it would probably have to go through probate.

    In additional to the one-time costs when the transfer occurs, they will also have ongoing costs for maintenance, real estate taxes, and insurance.

  • 1 month ago

    Specific to California:

    In order to keep the stepped up tax basis (i.e. Prop 13), the house needs to transfer directly from your name to the grandchildren.  This can happen as a gift when you are alive or inheritance.

    - For a grandparent to grandchild transfer it's called Prop 56 not prop 13. 

    You need to have the house in a living will to protect it from probate after you are deceased. 

  • 1 month ago

    You bet there would be a cost to them - a HUGE cost.  The best thing to do would be to have a trust in which you transfer it to them now, but retain a life estate interest in the house, which means you can live there until you die.  There's more to it.  Consult a lawyer to have a trust drafted.  This is likely what one will recommend.

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