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As a parent, you may be considering transferring ownership of your property to your child, whether as a gift or as part of your estate plan. While figuring out whether that is the right decision, it is important to keep in mind the potential tax consequences as well as control over your property. Below, we discuss the three ways a parent can transfer property to a child and the corresponding tax and control consequences.
Making a Trust
One way for parents to transfer real and personal property to their children while maintaining control is to establish a trust. With a trust, the parent transfers assets into the trust but remains in control of what happens to the property after they die. The children can be named as beneficiaries who will inherit the trust assets after the parent’s death. The parent can change what happens to the property after their death at any time. A trust has many benefits, which we discuss in a different post.
Transferring Property but Retaining a Life Estate
Parents can transfer real property to their children but retain a life estate in the property. This means the parent transfers full ownership to the child but reserves the right to use and live in the property for the remainder of their life. This option avoids probate because the child immediately takes legal ownership, but the parent keeps lifetime rights.
However, a parent cannot revoke a life estate deed. If circumstances change and the parent needs to sell or mortgage the property, the parent cannot do this without full consent and agreement of the child.
There are also tax advantages to making a trust as opposed to a life estate deed.
TOD and POD
For financial accounts, transfer on death (TOD) and payable on death (POD) accounts allow parents to transfer property to children, with the parent still retaining control. Parents can change beneficiaries during their lifetime. Upon death, the account transfers directly to designated beneficiaries without probate.
TOD accounts are more commonly used in investment accounts, such as IRAs, 401ks, brokerage account, and other accounts holding securities. POD accounts are generally used for checking accounts, savings accounts, certificates of deposit, and money market accounts.
If you have want to transfer property to your children while still retaining control during your lifetime, we at the Law Offices of Albert Goodwin are here for you. We are located in Midtown Manhattan in New York City. You can call us at 212-233-1233 or send us an email at [email protected].
About the Author
Albert Goodwin Esq. is a licenced New York attorney with over 17 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
