Jerry Taylor explains why putting your house in your child's name is a tax mistake. If you buy for $150,000 and it's worth $650,000 when they sell, they owe capital gains tax on the $500,000 gain. Use a revocable living trust instead to pass the home with a stepped-up basis and avoid that tax bill.
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.
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