For many people, their home is their most valuable asset. It is something that they have worked hard for and that they plan to enjoy in retirement. However, many people do not consider what will happen to their home after they die.
Ohio estate settlement costs can be a significant burden on your heirs. These costs can include probate fees, attorney's fees, and executor's fees. One way to avoid these costs is to sell your home during your lifetime.
If you sell your home during your lifetime, you can exclude up to $250,000 of gain from income tax calculation if you are a single taxpayer or $500,000 of gain if you are married filing jointly and have lived in the home for at least two years consecutively as your primary residence. This means that you can sell your home and keep the proceeds without having to pay any significant income taxes.
There are a few things to keep in mind if you are considering selling your Ohio home during your lifetime. First, you need to make sure that you have enough money saved up to cover your living expenses in retirement. Second, you need to decide what you want to do with the proceeds from the sale of your home. If you plan to give the proceeds to your heirs, you need to make sure that you do so in a way that will minimize estate taxes.
Here are a few options for what to do with the proceeds from the sale of your home:
Give the proceeds to your heirs as outright gifts. This is the simplest option, but it may not be the most tax-efficient. If you give more than $13,000 per year to any one person, you will have to file a gift tax return. And if your total gifts exceed the lifetime gift tax exemption, your heirs may have to pay estate taxes when you die.
Put the proceeds into a trust. A trust is a legal arrangement that allows you to transfer assets to someone else while maintaining some control over them. There are many different types of trusts, so you can choose one that meets your specific needs.
Buy life insurance. Life insurance can be used to replace the value of your home for your heirs. When you die, the insurance company will pay a benefit to your beneficiaries. This benefit can be used to pay estate taxes, cover living expenses, or for any other purpose that your beneficiaries choose.
If you are considering selling your home in Ohio during your lifetime, it is important to talk to a financial advisor or estate financial planning attorney. They can help you choose the best option for your individual situation.
In addition to the above, there are a few other things to keep in mind when considering how to avoid estate settlement costs on your home:
Reverse mortgage. A reverse mortgage is a loan that allows you to borrow against the equity in your home while you are still living in it. The money you borrow is not taxed, and you do not have to make any monthly payments. However, you must repay the loan plus interest when you die or sell your home.
Life estate. A life estate is a type of ownership that gives you the right to live in a property for your lifetime. However, the remainder interest in the property belongs to someone else. When you die, the remainder interest passes to the owner of the remainder interest.
Charitable gifts. If you donate your home to a qualified charity, you can deduct the value of the donation from your income taxes. You may also be able to avoid paying capital gains taxes on the donation.
There are a number of ways to avoid estate settlement costs on your home. The best option for you will depend on your individual circumstances. It is important to talk to a financial advisor or estate planning attorney to discuss your options and choose the best option for you.
This article materials should in no manner be considered as a replacement for consulting with estate financial planning professionals, nor should the general principles in this article be applied to specific situations without consulting with an attorney.