Sadly, far too many children face the loss of their elderly parents and then have to take on the complicated task of selling a parent’s home. In the event that the will states that the children will receive the proceeds from the real estate’s sale, there are two potential outcomes that could occur based on whether or not the parent had appropriate estate planning in place.
Either children are eligible to receive the full proceeds of the parent’s home with no capital gains tax responsibility or they will instead owe tens of thousands of dollars to the IRS by paying this. This inadvertent and simple mistake happens when parents add their children to the title while they are still alive. It makes sense that you want the house to be able to pass to your kids so you retitle it in their name as well as yours so that the house automatically transfers.
However, this perceived kindness can end up costing your beneficiaries thousands of dollars in unnecessary taxes. It is far better to have an estate planning strategy in place that can help you to accomplish these goals without generating massive tax liabilities. It can be very difficult to go through the process of discovering these challenges after the fact and you definitely don’t want your loved ones attempting to cope with this on their own. Make sure that you work directly with an estate planning lawyer and a financial professional to ensure that you’ve taken care of all of the details related to your estate planning so that assets like your home can pass as easily as possible to your loved ones.