Jerry Taylor explains why putting your house directly in your child's name is a tax disaster. If you bought it for $150,000 and it's now worth $650,000, your child owes capital gains tax on the entire $500,000 gain when they sell. A revocable living trust avoids this by giving them a stepped-up basis at your death.
Do not transfer your assets to your kid's name. It may have seemed like a good idea at the time, but it's not. And this is especially true when it comes to your home. Let's say you bought your home years ago when it was $150,000. Now the house is worth $650,000. If you give that home to your child and put their name on the deed, when they try to sell it, they're going to have to pay the tax on that capital gain of $500,000. Here's the solution. Instead of giving them the home while you're alive, put it in a revocable living trust. That way, when you die, they will get your tax basis in that home and owe no capital gains tax. And the home will pass to them outside of probate court. Jump on my newsletter in my link.
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