Wealth Transfer Made Simple: Tips for Gifting Homes to Your Kids

The great wealth transfer is already underway, and real estate is at the center of it. Baby boomers and the silent generation own close to $25 trillion in property, from primary residences to investment rentals and vacation homes. Over the next two decades, much of that will move to the next generation—and with it comes the potential for taxes, legal headaches, and even family rifts.

Here’s a clear, five-step guide to help parents pass down homes and vacation properties without sparking sibling drama or triggering an unnecessary tax bill.

1. Use a Will or Trust to Minimize Taxes

Leaving real estate through a will or trust gives heirs a “step-up” in cost basis. That means if they sell, they’ll only owe capital-gains tax on the appreciation after they inherit, not on decades of growth. Gifting property while you’re alive can saddle your kids with a big tax burden, so if you can wait, consider transferring at death or through a qualified personal residence trust.

2. Protect the Property with an LLC

Placing a home in a limited liability company (LLC) and then holding the LLC in a trust shields it from lawsuits and creditors. If the property is rented and something goes wrong—a tenant slips, for example—your heirs’ personal assets stay protected. LLC interests can also be discounted for tax purposes because they’re harder to sell, which can lower estate taxes.

3. Set Ground Rules for Use and Upkeep

Families often fight over who gets the beach house at Christmas or whether a ski cabin can be rented out. An LLC operating agreement lets you spell out everything in advance—holiday schedules, redecorating rights, even buyout provisions to keep the property in the bloodline and out of ex-spouses’ hands.

4. Fund Ongoing Expenses

A vacation home is only fun if someone can afford to maintain it. Set aside liquid assets or life-insurance proceeds to cover taxes, insurance, and repairs. Without that cushion, one sibling often ends up paying more than others, breeding resentment. Include a plan for splitting costs if the trust’s funds ever run low.

5. Plan for Cash-Out Options

Even if your kids promise to keep the property, life changes. Jobs move, families grow, and priorities shift. Build in a way for heirs to sell their share or buy out a sibling—such as allowing promissory notes or using trust assets—so no one feels trapped.

Bottom Line

Passing down real estate isn’t just about avoiding taxes; it’s about protecting relationships. With clear planning—using wills, trusts, LLCs, and a realistic view of future costs—you can give your children a lasting legacy instead of a long-running family feud.

Ready to Take the Next Step?

Schedule a complimentary strategy call with our estate planning team today. We’ll help you align your legacy goals with a plan that protects what matters most. Book your call now.