Today, I’d like to discuss a couple of options pertaining to the transfer of property between a parent and their child.
I’ve run into a couple of situations recently where a parent transferred a property to their child prior to passing away.
For a property to be transferred this way, there is specific paperwork that must be filled out. This paperwork is needed to exclude the property from additional taxes.
Let’s say I plan to transfer a property to a friend, and I bought that property back in 1990. This property is worth much more today than it was at the time of the purchase. If I transfer this property to my friend, even if I give it to them for just $1, the new tax base would still be reassessed at the current estimated value of the property.
If this same scenario were to occur between a parent and child, or between a grandparent and child, there is an exclusion that can be applied to ensure the child has the same tax base their parent or grandparent had at the time of purchase.
The required paperwork for this process can be obtained from the county assessor’s office.
This process allows people to transfer property without the use of a trust. A trust can, however, be a good way to meet the same goals while avoiding certain costs and tax ramifications.
Take the following scenario as an example of when a trust might be preferable: If a property being transferred is not a primary residence, it may be counted as an income property. This would make the property subject to capital gains tax if it were ever to be sold.
Before you make the decision to transfer a property, it’s important that you discuss all of your options with a professional.
As always, if you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.