Should I Just Give My House to the Kids? Part 3!

So this is the third installment of this discussion.  Why so many posts on it? Because it is important!  Because it is one of the most dangerous myths/misconceptions/misunderstanding (whatever you want to call it) that cloud the judgment of hard-working, middle-class seniors.  And, because it all too often gets well-meaning people into a heap of trouble.  The last part of the problem with giving the house to the kids is the tax aspects of the transaction.  Let's get this out of the way now so there is no confusion.  Probate and taxes are NOT the same thing.  Many believe giving the house away to the kids or holding property jointly with their kids avoids probate and taxes.  First, joint ownership of property does not avoid probate.  It delays probate until the second joint tenant dies.  Delaying probate is not the same as avoiding probate.  Second, joint tenancy does not avoid death taxes.  Assuming the two owners are husband and wife, half the value of the property is included in the estate of the first joint tenant to die and the other half in the estate of the last joint tenant to die.  If the owners are not husband and wife, the entire value of the property is included in the estate of the first joint tenant unless the other joint tenant proves otherwise, which is unlikely in the case of children co-owners.  Even worse, "putting the kids name" on the house is a gift that most likely exceeds the annual gift exemption amount thereby requiring the parent to file a federal gift tax return.  Of course, the parent didn't know that because he/she was simply "putting the kids name" on the house, but the IRS won't care.  It will care, however, about the failure to file a gift tax return!  And, another thing most people don't know, is the gift (which they didn't know was a gift) eats away at the lifetime federal estate tax exemption amount!  This will come as one of the rudest awakenings to the kids when mom and dad pass away and Washington demands its estate tax payment within 9 months.  I could go on and on about how bad an idea it is to give away the house to the kids.  Suffice to say, just don't do it.  Call for far better options: 413-588-8298!