On October 20, 2010, the New York Times published, Leave the Children the House, Without a Hefty Tax Bill, by Deborah L. Jacobs.
Jacobs explains that 2010 is a good year to give the house to children because the gift tax rate is at 35% in 2010 and it is scheduled to be at 55% in 2011.
Jacobs provides the following strategies:
- Give partial interests.
- Use a grantor trust.
- Create a QPRT.
- Create a legal entity.
Jacobs explains that there are drawbacks:
Perhaps the biggest hurdle, though, is the awkwardness of having business relationships with family members . . .
If you want to keep living in the house, you must pay fair-market rent to the family members or an entity (like a trust) that becomes the owner. Awkward though this might be, it's a smart estate tax move, because the rent then is a way of giving money to your family without having to pay gift tax.
Jacobs is the author of Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide. Jacobs keeps readers current between editions of her book by issuing updates that can be downloaded from her book's website http://www.estateplanningsmarts.com/ and by tweeting at http://twitter.com/djworking.