Your family home holds memories of everyone who grew up, visited and celebrated holidays there. Many people might assume that a house in Missouri may be an ideal gift for the next generation. However, as you draw up your will, it is critical to consider the financial implications for those receiving this valuable asset.
Financial implications of passing down a home
You may imagine that receiving a home would always be a welcome gift. However, this asset may come with unexpected financial strings attached. Whoever inherits the house will also become liable for mortgage payments and property taxes.
Estate taxes are another concern. If the home exceeds the federal or state exemption limit, your heirs will need to pay taxes on the excess value. They could end up house-rich and cash-poor if they use up their liquid assets on the transaction.
Assessing the needs of your loved ones
Getting input from your potential heirs is a critical part of wise estate planning. Talking to them about their needs can prevent you from creating an unintentional financial burden.
When your children are older, they may already have established homes. An additional house could complicate their lives as they deal with maintenance and upkeep. If they choose to sell the house, they will incur any legal and real estate transaction costs involved.
Passing a home through a will or trust
A will is a common legal document for distributing assets. You can designate a single heir for your home or pass it to all your children as co-owners. The assets left through a will still involve working with the probate court.
Trusts are more involved documents that determine the ownership of assets during your lifetime. When written properly, your loved ones will not have to deal with the complications of probate court after you die.
Planning to distribute your assets to your heirs involves careful consideration. Working with an estate professional and consulting your loved ones can simplify this process before and after you pass on.