Home ownership question?

I am considering putting my 2 adult son's names on my house deed to avoid state income tax. What are the pro's and con's of this? I completely trust my sons in this matter. Should I leave my name on the deed also? Has any one done this, and what is your advice?

Ljane

I think a lot will depend on the state you live in or where the property is located.

There might be some confusion here.

I'm not aware of any way that you would pay less state income tax by adding your sons' names to the deed to the home you own. The income tax related items associated with your home are property taxes and interest on a mortgage, which you would still be able to deduct if you continue to pay them.

Perhaps you are referring to a state inheritance tax that might be imposed when you die. As suggested above, whether there will be any such tax depends on the value of your estate and the inheritance tax rules for your state. Thus, you should seek professional advice.

Also, be aware that when you add your sons to the deed, you will have made a gift to each of them equal to one third of the value of the home. Although the gift will not likely be enough to generate gift tax, you'll need to file a gift tax return to take advantage of the various gift tax exemptions available to you. If your estate is substantial, you might well want to consider utilizing what's called a Qualified Personal Residence Trust to transfer (eventually) the full ownership to your sons. That's another reason for seeking professional advice from a competent estate planning attorney.

Thanks for both replys. I did mean state inheritance tax. I really wasn't thinking when I wrote income tax. I live in Pennsylvania. I will see an attorney, but I was just after some feed back from fellow tuggers first.

My main concern is what would happen if one of my son's got into a horrible car accident. Could the injured party sue and take my house?
They both have safe driving records and excellent insurance, but one never knows what might happen. Other than that concern, I know of no other reason not to put the house in their names.

Thanks for all posts to this question.
Ljane

I would think that putting your house in a trust with you as trustee and your sons as trustees after your death, would protect you more than having their names on the deed. You avoid probating a will as the house continues in the trust--the trustees change after your death. You would continue to have sole discretion regarding your house. For example, you could sell it and use the proceeds to buy another home or pay for medical needs, etc.

It's wonderful that you completely trust your sons, but this situation is fraught with some possible future difficulties -- how are they going to agree on what to do with the house, should you pass and they are co-owners? Will they both agree to sell and split the proceeds? Will one want to keep it and buy the other out (can they agree on a price)? What influences will their spouses/significant others/children have? If you need to sell, as previously mentioned, will they both agree with you on the sale and the sale terms?

Professional advice is definitely in order -- you don't know what the future holds, how life events, personalities and interests can change and it would be best not to set up a situation that could very easily lead to conflict.

When you set up a trust, remember that the executor ends up with a lot of control and even when they are friendly siblings now, things can change in the light of reality of settling an estate. Of course, even an unscrupulous executor who is not a beneficiary can adversely affect the distribution of an estate.

(Sorry, recent bad experiences relating to estate settlement).

A simpler solution would be give them a deed which places title to the property in their names,
reserving a "life estate" in yourself.

Its cheaper that drawing up complex trust papers and no judgment or claim against either of them could disturb your interest or right of possession (as long as you lived). However, if you ever wanted to do something else with the property, you'd have to ask them to join in or be limited to your life-estate.