As a homeowner, your house should be a critical part of your estate plan. According to AARP, your home is your most valuable financial asset. Determining what happens to it after you pass is not always an easy decision. If you have children, you may consider leaving it to them; after all, it houses your memories, keepsakes and possibly your kids during uncertain financial times.
Before you leave your home to your kids, however, some considerations exist.
Consider the house’s worth
Before you include your home in the estate plan, you have to know its value. If you still owe on the house, you must consider how much you owe based on the home’s worth. During a recession or if the housing market declines, your kids could owe more than the home is worth. They could sell the house, but they would have to pay the bills while waiting for it to sell.
A bank can either foreclose on a house, or your heirs can take on the mortgage or pay off the rest. Before including the place in your will, talk to your children about their options.
Investigate tax effects
If your kids sell the house, you have to consider the home’s taxes. The government takes a cut of the profit of a house. Many people decide not to transfer the title while still alive because their children become responsible for liability and house expenses without a step-in basis. The step-in basis uses the price of the house when settled rather than what you originally paid for it.
Before you can pass on the home to your kids, question them about what they want. Do not leave property to those who do not want it.