I recently met with a couple in my office from Fair Oaks Ranch, Texas. They have three children and they want as few assets as possible to be frozen and tied up in the probate process upon their death. They were considering transferring their home, and all of their other real estate, to their children right now, so that their children would not have to go through probate. I told them that there are several important tax consequences to consider when donating assets to your heirs while you are alive.
1. Depending on the size of your gifts, you could trigger the 40% estate tax.
2. Depending on the value of your real estate at the time of your death, you could leave your children with a hefty tax bill.
3. You may not qualify for Medicaid benefits if you go into the nursing home.
Transferring your assets to your heirs as gifts during your lifetime can affect the tax on your estate and the tax owed by your heirs. Make sure to work with an estate planning attorney with an excellent working knowledge of the practical effects of the property laws, trust code, Medicaid eligibility manual, and the tax code. If you have specific questions regarding these issues, contact me at (210)202-1141 or register for an upcoming educational seminar on my website.