Passing down property to the next generation is more than just a family gesture—it’s a legal and financial decision with lasting consequences. If you're a parent in Tyler, Texas, thinking about how to transfer your home or other real estate to your children, working with a real estate lawyer can help you avoid costly mistakes and protect your family’s future.
Transferring real estate isn’t as simple as signing over a deed. There are tax rules, Medicaid concerns, and family considerations that must be addressed. A Tyler real estate lawyer understands Texas laws and can walk you through the options, helping you find a path that fits your family’s needs and goals.
There are several ways to transfer real estate in Texas. Each has its own benefits and risks. Here are the most common options:
One option is to gift the property to your child. This means you transfer ownership without expecting any payment. While this might seem straightforward, it could trigger the federal gift tax if the value of the property is higher than the annual exclusion limit.
A real estate lawyer can help you understand how gifting affects your taxes and what forms you may need to file.
Parents sometimes sell property to their children at a lower price. This gives the children ownership while still allowing the parents to get some value in return. This strategy can also reduce the size of the parent’s estate, which might be helpful for estate tax planning.
However, it’s important to do this carefully. A sale that’s too far below market value may still be considered a partial gift by the IRS. Consulting a lawyer ensures the transaction is properly documented.
A trust is a legal tool that allows property to be held and managed for someone else's benefit. In this case, the parents create a trust and name their children as beneficiaries. The trust can be set up to pass property automatically at a certain time, or keep it safe until a later date.
Using a real estate lawyer in Tyler ensures the trust is correctly drafted and meets all legal requirements.
A life estate lets parents stay in their home for the rest of their lives, even though the property is legally transferred to their children. When the parents pass away, the home goes to the children without going through probate.
This option works well for many families, but it can’t be undone easily. That’s why it’s important to speak with a lawyer before choosing this route.
Adding your child’s name to the deed creates joint ownership. This may seem like a simple way to transfer property, but it can create problems. For example, if your child gets divorced or has debt issues, the house could be at risk.
A real estate lawyer can help you explore safer options that still achieve your goals.
If your child inherits your property through a will or trust after your death, they may receive a "stepped-up basis." This means the home's value is reset at the time of your death, potentially lowering capital gains taxes if they later sell it.
This tax benefit is often lost if the property is gifted during your lifetime. An experienced lawyer will help you compare the tax impact of each option.
Whether you’re thinking about gifting your home, creating a trust, or just want to explore your options, don’t make this decision alone. Real estate laws in Texas are complex, and what works for one family might not work for yours.
Transferring Texas real estate to children can be complex. Therefore, we encourage you to consult with Estate Planning and Real Estate Lawyer Bradley S. Campbell who can guide you about the estate and tax implications for your family's own unique situation when considering one of these options. Book a consultation with his office if you're considering ways to transfer Texas real estate to your children.
References: Newsday (May 2, 2024) “Wills, trusts, sales: How Long Island parents pass houses to kids” and Urban Turf (March 13, 2023) “How Can Parents Transfer Real Estate to Their Children?”
