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If you own real estate, your real property will likely be your most valuable non-financial asset at the time of your death. In addition to financial value, real property often holds sentimental importance for families. For many parents, the transfer of real property to children is a major estate planning consideration. A number of options for the transfer of real property to children or other beneficiaries as part of an estate plan are detailed in a recent piece in USA Today.
Gifting the property during your life is a generous transfer that relives you of ownership responsibilities, but can result in capital gains tax consequences for the beneficiary.
Putting the property into trust allows you to transfer property to beneficiaries upon your death while avoiding the probate process with the tax benefit of a step-up in basis for the beneficiary.
Bequeathing the property by will provides a stepped-up basis for the beneficiary, but the property will be transferred through the probate process.
Selling the property during your life to the intended beneficiary can provide for your retirement, but may have tax consequences for both parties.
Adding a transfer on death designee on the property allows you to transfer your property to the beneficiary upon your death while avoiding probate and capital gains tax consequences.
When contemplating the transfer of real property as a part of your estate plan, it is important to weigh the pros and cons of all options based upon your unique circumstances and goals.