Are you a baby boomer?

Well, if you were born in the years soon after WW II, then you are. Birth years starting early to mid 40’s and ending about 1964 put you in this category. Not an exact science for sure.

You are probably familiar with all the forecasting that is directed at you or this group. Biggest wealth transfer in history, big cultural shifts and so on. One thing is for certain,  the baby boomer’s are helping to propel the growth in estate planning because this group is moving into retirement. And one of the critical baby boomer retirement issues is what to do with the home?? It’s a big asset for most, probably THE biggest. However, it’s different today. For instance, what did your parents pay for their first home? Mine paid $10,000 in Southern California. Maybe you live in a part of the country where housing is out of control and you have hundreds of thousands of dollars of equity in your home and the house adds up to a pretty big nest egg. No matter where you live, understanding how to deal with your home is important.

So, should you sell the house and downsize?

This is a big deal, emotionally and financially. We recently put on a tax and estate planning workshop for boomers who are sitting on huge capital gains in the home. The room was packed, and tons of questions were asked. Most people in the room wanted to sell the home but were sitting on big gains. So the focus was on the unique opportunities to sell or transfer a home with big gains and not get destroyed by taxes. If you thought about it, you would probably like to stay in your home throughout your retirement years. Many of us would. So that begs the question, “how do I pass my home to my beneficiaries if I am not selling it?”
If you leave your home through a simple will, this could lead to big amounts of pain in many areas. Like probate, which is a court action that involves figuring out your wishes. Just having a will does not get you out of probate. It can be costly (up to 15% of the value of an estate can go toward probate costs according to AARP), it is a public matter for anyone to witness and probate courts are backed up which could take years to muddle through the courts. Dealing with probate can lead to wasted dollars, missed work and worse yet – family fights.

To smooth things out, you will want to establish a trust. A trust can accomplish some great things. Like making sure your assets don’t end up with your child’s ex-spouse. Your trust allows you to avoid probate and your family affairs are private. Your trust can be revocable or irrevocable. For example, you may decide to pass your assets to the next generation through an asset protected irrevocable trust. This would guard the assets from the potential creditors of your child’s beneficiaries. This is a trust YOU set up now, not a trust your kids set up later. Also, there are potential tax savings if you choose to transfer your property to your kids while you are still alive.

There’s also the planning tool called a Qualified Personal Residence Trust (QPRT). The QPRT can be an effective transfer strategy for your home.

Imagine this scenario…

You have three kids and a nice home. Instead of putting an air tight plan in place now to deal with your home, you just give the home outright to your three kids upon your passing.

What do your three kids do with the house? Maybe one of them wants to rent it out? Maybe another kid needs cash to send their own child to college so he/she wants to sell the home? What if one of your kids has a legal problem and their creditor is going after their assets? One of the assets is a house that is co-owned with siblings so now the siblings have problems. What if one of your kids gets divorced and the home that you passed down is now part of a divorce fight? Remember, that home is co-owned with siblings. Ouch!
See how this could get sticky in a lot of different ways?


The point of all this is to really think about how you want to deal with your home for YOU first. Then your kids second. Will you live in it forever, sell it and downsize or transfer it during your lifetime? There are important tax and planning outcomes associated with all theses different choices.

Our clients have access to legal services provided through the sister company to Barth Financial Advisors, LLC, BarthCalderon LLP. Contact us at (714) 672-0022 to schedule a complimentary strategy session and get expert advice on how to protect your Family, your Assets, and your Legacy.

To print PDF Are You a Baby Boomer?

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