Stop doing this to your kids

24 Feb 2024 · 1 min

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1:01

In this brief financial‑advice video, Jerry Taylor warns parents against gifting their primary residence to a child while they are still alive. He explains that although a lifetime gift avoids probate, the child will inherit the original purchase price as the cost basis. If the child later sells the house, they must pay capital‑gains tax on the difference between the current market value and the original purchase price, potentially 20‑30% of that gain. Taylor advises instead to transfer the home through a will or a trust at death, which allows the child to receive a stepped‑up basis equal to the home's fair market value, eliminating capital‑gains tax on a subsequent sale, and also avoids probate when done via a trust. The video ends with a brief self‑promotion inviting viewers to sign up for his newsletter or work with him.

Chapters

If you're thinking about giving your home to your child, stop what you're doing and listen, because you could be setting them up for a tax bill that is totally unnecessary. When you give your home to your child, yes, they can avoid probate at your death because the house is already theirs. But if they try to sell that house, they'll be responsible for paying capital gains on it. Here's how you figure that out. Take the number you paid for the house and subtract that from the current value of the home. That's the number your child would be paying capital gains on, which could be 20 to 30% of that number. And if you want to work with me or get my newsletter, go to my profile link. Instead of giving that home to your child during your lifetime, let them inherit that home from you in a will or a trust. If your child inherits your home through a will or a trust and then they sell it, their capital gains tax will be zero. And if they inherit it through a trust, They also get around probate. Don't give them your home. Let them inherit it. You'll be doing them a huge favor.