One question commonly asked during estate planning is ‘Should I transfer my house to my child?’. Transferring your house to your child is a decision that requires careful consideration. While it may seem like a straightforward way to pass on your property, there are important factors to weigh before making such a decision – especially in the context of estate planning in Pennsylvania.
Lack of Control
First and foremost, transferring your house to your child means relinquishing ownership and control of the property. Once the transfer is complete, your child will have full legal ownership of the house, including the right to sell or mortgage it without your permission. This lack of control can be concerning, especially if you rely on the house for your own housing or financial security.
Tax Implications
Transferring your house to your child can have significant tax implications. In Pennsylvania, there is a 4.5% tax rate on transfers from a decedent’s estate to their child. On the other hand, if you transfer the property to your child while you are still living and your child then sells the home, they may be subject to capital gains tax of up to 20% on any appreciation in the value of the property since you acquired it. This could result in a substantial tax bill for your child.
Medicaid Eligibility
Additionally, transferring your house to your child can impact your eligibility for certain government benefits, such as Medicaid. If you require long-term care in the future and have transferred your house to your child within the five-year lookback period, it could affect your eligibility for Medicaid benefits to cover the cost of care.
Family Dynamics
It’s also important to consider the potential implications of transferring your house to your child on your family dynamics. Unequal distribution of your estate’s assets among children can sometimes lead to tension and disputes among family members. It’s crucial to have open and honest conversations with your family about your decision and the reasons behind it to mitigate potential conflicts.
Consulting with a Professional
Before deciding whether to transfer your house to your child, it’s highly advisable to consult with an experienced estate planning attorney. They can help you understand the implications of your decision and explore alternative options that may better suit your needs and goals. A comprehensive estate plan should take into account your entire financial and familial situation to ensure that your wishes are carried out effectively and that your loved ones are provided for.
The team at Antanavage Farbiarz is here to help! Allow our experienced team to guide you through the estate planning process. To learn more, schedule a consultation by calling our office at (610) 562-2000.