Leaving your home to your kids is a generous gesture, but it can cause unexpected troubles later on.
Maintenance
Don’t underestimate just how much work it takes to own a piece of property. Expenses like taxes, insurance payments, roof repairs, and water heater replacements can add up quickly. Owning a home is a huge responsibility that requires time, money, and effort.
If your kids are already strapped for time with their jobs and families of their own, they might not welcome the hassle of maintaining your house on top of everything else.
Conflict
Disagreeing over real estate is the number one cause of fighting among siblings. After all, you can’t exactly divide a physical house into equal parts and give them to each child.
Tensions will start rising if one child wants to keep the house for sentimental reasons while another wants to sell and pay off their own debts. Even if they all want to sell, they might disagree on price, timeline, or which agent to work with.
Fairness
Life may have treated your children equally while you were raising them, but siblings are likely at different points in their lives now. For one child, inheriting the family home from you may feel like a generous gift, but for another child who is already financially stable, it might be an expensive hassle.
By forcing them to own the house together, you might breed resentment when the more successful child is shouldering all of the costs alone.
Liquidity
Liquidity is basically the ease with which you can convert something into cash. Houses are not liquid. If all of your wealth is tied up in real estate, your kids will have to sell your family home just to get enough money to pay for their own lives.
They’ll then need to hope that houses sell quickly. They could lose a lot of money if they’re forced to sell during a down market.
Sentiment
It’s natural to feel attached to your family home. However, just because your kids grew up in that house doesn’t mean they want to spend the rest of their lives there. They might love the memories, but they also have careers, partners, and lives of their own to think about.
You don’t want to put undue pressure on them to stay in a house that doesn’t meet their needs just because you lived there for decades.
Taxes
Not only do kids who inherit property have to deal with ongoing property taxes, but they also can face tax bills from the estate itself. If your kids don’t have enough liquidity to pay for the taxes owed on your house after you pass away, it could be forced into sale to pay the government.
The last thing you want is for your child to lose their inheritance because they didn’t have the cash to pay taxes.
Practicality
Just because your house was perfect for your family doesn’t mean that it will suit your adult children. Maybe it’s too far away from their job, the neighborhood has gone downhill, or it’s simply too big or too small to accommodate their growing families.
Don’t force your kids into a house that doesn’t match their career goals or daily commute.
Dependency
Leaving an asset as large as a house can cause your kids to become dependent on your wealth. They may be less motivated to pay bills on time or save money in their 20s and 30s because they know that a house will eventually be theirs.
Giving your kids everything now can actually leave them far less independent than if you had them start saving and managing money themselves at a young age.
Management
Owning a rental property isn’t as easy as many people think. Even if your kids decide to rent out the house, they’ll need to manage tenants, perform maintenance and repairs, and navigate their town’s landlord-tenant laws.
If they’re unfamiliar with being landlords, they may have to hire a professional to manage the home for them, which could take up a large chunk of rent payments.
Freedom
Selling your home gives you the opportunity to enjoy that money while you’re alive. Travel, spoil the grandkids, take extra vacations, or pay for your own healthcare. Don’t feel obligated to leave your house to your children.
By selling it now, you can pass along cash or liquid investments that will provide them with freedom, not a decade-old family mansion.
Sources: Please see here for a complete listing of all sources that were consulted in the preparation of this article.