Passing down your home to your children is a big step, and in Pennsylvania, it’s not something you want to rush.
Whether it’s your family house, a vacation cabin or land you’ve held for years, how you transfer it matters. The two most common ways to do it are through a deed or through a trust. Each impact taxes, legal rights and even future Medicaid eligibility.
Here’s what you need to know before signing anything.
Start with the right type of deed
Transferring property using a deed is often the quickest route. It’s a legal document that shifts ownership, and there are a couple of types parents tend to use:
- Quitclaim deed: This transfers whatever ownership interest you have without any guarantees. It’s simple but offers limited protection for your child.
- Warranty deed: This includes a legal promise that you own the property free and clear and have the right to transfer it.
Deeds can be efficient, but they come with trade-offs. If the property is gifted during your lifetime, your child will receive your original cost basis. This could mean a bigger tax hit if they sell it later. Also, giving away property may affect your eligibility for Medicaid if you need long-term care within five years of the transfer.
Use a trust for more control and protection
A trust can offer more flexibility than a deed, especially if you want to set conditions on the transfer or shield the property from future risks. These are your two main options:
- Revocable trust: You stay in charge while you’re alive and can make changes at any time.
- Irrevocable trust: You give up control, but the property may be protected from creditors or long-term care costs.
One key benefit is tax-related: if the property passes through a trust after death, your child may get a step-up in basis. That means less capital gains tax if they sell it.
Seek legal guidance
Every family is different. Every property situation is too. A small mistake today can become a big problem down the road.
Before you transfer ownership, whether by deed, trust or another method, clear all doubts first. Speaking with an estate planning attorney might help you with this. Doing so would enable you to make the choice that fits your goals — one that protects your loved ones and helps you avoid costly risks.