Are Inherited Real Estate Properties a Trojan Horse?

With the price of everything increasing, wages stagnating, and an increasing number of employers keeping workers at arm’s length by labeling them independent contractors, it takes more and more money to be considered wealthy, or even middle class.  You have to admit, though, that you are more privileged than most if you own a house or condominium in New York City and do not owe a mortgage on it.  It pains you to hear about your children living with more financial stress than you had to deal with at your age, but it is in your interest and theirs if you don’t give them large amounts of money, at least not more than you are eligible to give under the annual gift tax exclusion.  It is possible to put your children in a noticeably better financial position by leaving them a real estate property in your will, but only if you do it right.  A Bronx estate planning lawyer can help you plan to leave real estate property to your children without causing them a lot of unexpected expenses.

Beware of Geezers Bearing Gifts

To say that real estate in New York City is valuable is an understatement.  A one-bedroom condo in the Bronx costs as much as a McMansion in Florida or a two-story house in the Midwest with a basement the same size as the main floor.  New Yorkers can’t understand why anyone would want to live anywhere besides New York, but your kids might have their reasons for wanting to stay in the place where they have relocated; their career or their in-laws may exert a force equal and opposite to the gravitational pull of the Big Apple.  You should ask your kids sooner rather than later whether they want to inherit your condo or whether they would rather have the cash.  They will probably choose the condo, because, even if they don’t want to live in it, they can rent it out for a princely sum or use it as a vacation rental; in either case, it is an income-generating asset.

If you are strategic enough, you can transfer the house to your son or daughter outside of probate; one of the ways to do this is by transferring ownership of the house to a revocable trust.  Whether or not the house goes through probate, the new owner will still be responsible for paying property taxes on it, but this will not be burdensome if the new owner is living in the house mortgage-free and has a job or if he or she is deriving rental income from the property.  The real expenses come if your family member later decides to sell the house, because of capital gains tax.  Upon inheriting the real estate property, the beneficiary should take advantage of thev1014(e) step up in basis, in order to reduce the amount of capital gains tax that he or she will eventually have to pay.

Schedule a Confidential Consultation With a Bronx Estate Planning Attorney

An estate planning lawyer can help you plan to have your younger family members inherit real estate from you.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.

Source:

naepcjournal.org/journal/issue17j.pdf