You want your children to have your house after you pass away. However, you do not want to give it to them as a gift in advance because you plan to live there until you pass away. Likewise, you don’t want to sell it to them. So, if you just stay in the home and wait, what happens?
After you pass away, the tax basis for your home increases to the fair market value as it was on the last day of your life. This means that neither you nor your heirs have to shell out a substantial sum for capital-gains taxes. If your entire estate is worth less than $11.4 million (as of 2019), then your heirs also do not have to worry about federal estate tax payments. As such, simply remaining in your home may be the best economic decision.
Once your heirs own the house, they can decide what they want to do with it. They may move into the home and live there, sell the house to a third party, rent it out as a source of income or anything else they wish.
This is not your only option. You could sell the home and split up the money if you have multiple heirs, and you don’t want them fighting over the house. You could leave the house to a trust if that’s the best way to pass it on to the next generation. There are a lot of options, but you just need to carefully consider all of them and decide what is best for your family.
