Should I have a Trust drafted or just put my kids on the deed to my house?

When deciding if a trust is right for you or if you want to just add your kids onto your deed as joint tenants you need to answer a couple of questions.  First, has your home gone up in value since you purchased it?  Second, do your adult children live in the home?  Third, if you die when your children are still under 18, wouldn’t you want to set forth who you want to take care of the children and the home until they become adults?

These are not the only questions.  But, if you have a home that has gone up substantially in value since you purchased it you probably want to have a trust to save the children substantial taxes when they sell the house.  The benefit of a trust is that the house passes to the children with the “basis”  (cost for determining profit) of the value at the time that the house transfers to them.  That means that if you purchased the house for $100,000 but it is worth $300,000 at the time it passes to the children through the trust then their cost basis for calculating profit from the sale of the house is the current value (at time of the transfer after your death) in our example of $300,000, rather than your original cost basis of $100,000 if you had chosen to add their names to the deed instead.

Secondly, if the children are living in the home already with you, then adding them to the deed allows them to use the primary residence tax exclusion of $250.000.  That is, if they lived in the house 3 of the past 5 years.  But, if the home has gone up substantially in value and the $250,000 tax exclusion would not cover all profit from your original purchase price then a trust would be a very good idea to allow the children to get the stepped up cost basis or the amount it is worth at the time the house transfers to the children after your death.

If you have a home and want to avoid probate when it passes to your children having a trust is a very good idea.

Third, a trust is also a good idea if your children are under 18.  You can say in the trust who you want to be their guardian in the case that you die or become incapacitated.  A trust can also say who you want to take care of your affairs if you become incapacitated and unable to on your own.

Included in a trust package are the following — Trust, Certification of Trust, Pour-0ver will, power of attorney, healthcare directive, Transfer of assets to the trust, and new deed.

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