California residents who own homes might want to consider giving those homes to their children. However, there are risks associated with this that should make you think twice.
Potential tax issues
If you give your child your house and then end up passing away, they might be stuck dealing with a hefty tax bill. Although the taxes remain the same during your lifetime, if you die and leave your child the home, they will have to bear the costs of the taxes on the property. This could range into hundreds of thousands of dollars.
You might have a penalty when trying to qualify for Medicaid
It might seem like a good idea to transfer ownership of your house to your child so that you can qualify for Medicaid benefits, but this can work against you. If you do this within five years of giving the home to your child, you can be penalized from ever qualifying for Medicaid again. This is because it’s considered dishonest.
Dealing with their financial issues
Another problem with giving your child your home is that you might end up having to deal with their financial troubles. If your child has a problem with debt, their creditors could file liens on your home, which could result in the house losing some of its value.
You might want to continue living there
If you decide you want to continue living in your house, giving it to your child could be detrimental. It would mean you would become their tenant and you might have problems. This is even more of a risk if your relationship sours. In many cases, money and family do not mix.
In some situations, leaving your home to your child is a good idea. You should consider these risks before making a decision you might regret.