Should I Transfer My Family Home to My Child? It’s a common question we hear from parents looking to simplify estate matters or reduce future tax burdens. Concerns about probate, Pennsylvania inheritance tax, and long-term care planning often lead families to consider transferring the home during their lifetime.
But before you decide, “Should I transfer my family home to my child?” it’s important to understand the full picture. While there are potential benefits—such as avoiding probate and securing Medicaid eligibility—there are also significant risks, including loss of control over the property and unintended tax consequences like increased capital gains exposure.
At Bumbaugh | George | Prather | DeDiana, we help Southwestern Pennsylvania families weigh these decisions carefully. Our estate planning attorneys can walk you through the legal and financial implications of transferring property to a child, and help you explore alternatives like life estates or trusts that may better protect your goals and your legacy.
Understanding the Advantages of Transferring Real Estate
When planning for the future, it’s natural to consider how best to preserve your assets and minimize complications for your loved ones. Transferring your family home to your child may seem like a straightforward way to achieve those goals. But before making a decision, it’s important to understand the potential advantages—and the legal conditions that must be met to fully benefit.
Avoiding Probate and Inheritance Taxes
One of the primary motivations for transferring real estate during your lifetime is to avoid probate. When a home is gifted outright to a child, it is no longer considered part of your estate at death, potentially bypassing the probate process altogether.
In Pennsylvania, this strategy may also reduce inheritance tax liability. The state imposes a 4.5% inheritance tax on transfers to children. However, if the property is transferred more than one year before your passing, that tax may be avoided entirely.
Potential Medicaid Benefits
Another reason families consider transferring a home is to plan for potential long-term care needs. Under current Medicaid rules, a home transferred more than 36 months before applying for benefits may not be counted as an available resource when determining eligibility.
It’s worth noting, however, that to receive this protection, the transfer must be complete. Retaining any interest—such as a life estate or joint ownership—can jeopardize your eligibility.
Our team can help assess whether a transfer makes sense based on your health outlook, financial picture, and care needs, and explore other asset protection strategies if needed.
Remove the asset from your estate
Transferring ownership can also serve to remove the property from your taxable estate. For those concerned about future estate exposure or medical benefit qualification, this can be a valuable part of a broader estate plan.
Disadvantages and Risk of Transferring Your Family Home
While transferring your home to a child may offer some estate planning advantages, it’s not without its drawbacks. If you’re asking, Should I transfer my family home to my child?—it’s just as important to understand the risks as it is to consider the benefits.
Loss of Control Over the Property
Once the deed is transferred, you no longer legally own the property—and that means giving up control. If your child chooses to sell the home, move in with a partner, or make changes to the property, your ability to stay in the home or make decisions about it could be compromised. In cases of divorce or the unexpected passing of your child, legal and financial complications can also arise, potentially threatening your continued residence.
Tax Implications for Your Child
When you gift real estate to your child, they assume your original cost basis for income tax purposes. This can lead to a much larger capital gains tax if the property is later sold.
For example, if you purchased your home decades ago for $60,000 and it’s now worth $150,000, transferring the property during your lifetime means your child would likely pay capital gains tax on the $90,000 appreciation when they sell.
By contrast, if the property passes to your child through your estate, they may receive a “stepped-up basis” to the fair market value at the time of your death—potentially eliminating or greatly reducing capital gains taxes.
While Pennsylvania inheritance tax would still apply (typically 4.5% for children), it is often significantly lower than capital gains tax liability.
Loss of Potential Real Estate Tax Rebates
Some homeowners benefit from senior or income-based real estate tax rebates, which may be forfeited upon transferring ownership. After a transfer, questions often arise about who pays the real estate taxes, homeowner’s insurance, and utility bills. Are you still considered a resident-owner—or now a tenant in your child’s property?
These changes can affect your financial situation, eligibility for local rebates, and even how your residency is classified for benefit programs.
Navigating Property Transfer Options: What to Consider
If you’re asking, “Should I transfer my family home to my child?”, it’s important to understand all available options. Whether you’re planning for tax efficiency, long-term care, or family peace of mind, the method you choose can have lasting financial and legal consequences. At Bumbaugh | George | Prather | DeDiana, we help families across Westmoreland County explore these choices with care and confidence.
Gifting the Home Outright
One of the most straightforward methods is to gift the property during your lifetime. In 2025, the IRS allows individuals to gift up to $19,000 per recipient without triggering federal gift tax reporting requirements. Married couples can combine their exclusions to gift up to $76,000 to a child and their spouse.
However, this method comes with trade-offs:
- You give up legal control of the property.
- The five-year Medicaid look-back period still applies.
- Your child assumes your original tax basis, which may lead to higher capital gains taxes if the home is sold.
- Pennsylvania inheritance tax may still apply if the timing requirements are not met.
Selling the Home to Your Child
Selling the property is another option, but it must be handled with precision. If you sell the home below its fair market value, the difference is considered a gift and could reduce your lifetime federal estate and gift tax exemption.
To avoid this, some families sell the home at full market value and structure the transaction so that the parent holds a promissory note. Annual gifts may then be used to help the child make payments, aligning the transaction with IRS rules while keeping estate planning goals intact.
Life Estate: Retaining Some Control
A life estate allows you to retain the right to live in the home for the rest of your life, even though ownership is transferred to your child. This approach offers several benefits:
- You maintain some control and legal residence.
- The home may avoid probate.
- It may reduce or eliminate Pennsylvania inheritance tax exposure.
However, you’re still responsible for property expenses, and Medicaid rules may still apply if the home is transferred within five years of applying.
Transfer-on-Death Deed
A Transfer-on-Death (TOD) deed, available in many states, functions like a beneficiary designation on a bank account. Ownership transfers automatically at death, avoiding probate. The advantage of a TOD deed is that you retain full control during your lifetime and can revoke or change the designation at any time.
While not currently permitted in Pennsylvania, our attorneys can explore similar alternatives that achieve the same goals.
Trusts: A Strategic Approach
For Medicaid purposes, consider this too. One option might be a carefully structured, irrevocable trust to protect the home.
For clients concerned about asset protection and Medicaid planning, an irrevocable trust can offer long-term benefits. Once the home is transferred into the trust, it is removed from your estate—potentially preserving eligibility for public benefits.
However, once placed in an irrevocable trust, you cannot change the terms or reclaim the property. This strategy must be carefully timed and structured to comply with legal requirements and avoid penalties.
Additional Considerations for Transferring Property
Transferring a home to your child is more than just a legal transaction—it involves a range of financial, legal, and personal factors. From capital gains exposure to emotional ties, it’s important to evaluate every angle before making a final decision.
Here’s a brief overview of key considerations:
| Consideration | Description |
|---|---|
| Capital Gains Tax | Tax owed on the profit if your child sells the home later, based on your original cost basis. |
| Property Valuation | Understanding the current fair market value of the home is essential for tax and transfer planning. |
| Sentimental Value | The emotional attachment to a family home can impact how and when it’s best to transfer ownership. |
| Probate Process | Transferring the property now may help avoid probate later—but only if structured correctly. |
| Estate Tax | While Pennsylvania does not impose a state estate tax, federal estate tax may apply to larger estates. |
Federal Income Tax Considerations
There are also tax implications to consider. Under federal tax law, homeowners can exclude a portion of capital gains from taxation when selling a primary residence—if they meet certain ownership and occupancy requirements.
- Single taxpayers can exclude up to $250,000 of profit from capital gains tax.
- Married couples filing jointly may exclude up to $500,000.
However, if your child receives the home as a gift and later sells it, they may not qualify for this exclusion—especially if they haven’t lived in the home for at least two of the last five years.
Understanding Pennsylvania Inheritance Taxes
One of the most common reasons Pennsylvania parents consider transferring their home to a child during their lifetime is to reduce or avoid state inheritance taxes. While this strategy may be effective in certain situations, it’s important to understand how the Pennsylvania inheritance tax works and what rules apply.
In Pennsylvania, transfers of property to children are subject to an inheritance tax rate of 4.5% based on the property’s fair market value at the time of the decedent’s death. However, if the home is transferred as a gift during your lifetime—and you live at least one year after the transfer—it may not be subject to the tax at all.
Timing, documentation, and overall estate strategy all matter. Improperly structured transfers could still trigger tax liability or create complications with Medicaid or capital gains taxes down the road.
Why You Should Consult an Attorney Before Transferring Your Family Home
Transferring your family home to a child may seem like a simple way to protect your assets or avoid probate—but without legal guidance, it can have unintended financial and legal consequences. That’s why consulting an experienced estate planning attorney is a critical first step.
A lawyer can help you:
- Understand tax implications, including capital gains, inheritance tax, and gift tax rules
- Evaluate Medicaid eligibility concerns and the 5-year look-back period
- Avoid disputes or legal complications with other heirs or family members
- Protect your right to live in the home through tools like life estates or trusts
- Structure the transfer properly to align with your long-term goals
Why a Full Estate Plan Matters
A property transfer is just one piece of your larger estate. Without a comprehensive estate plan, you may leave other important areas unprotected. A well-structured estate plan helps ensure:
- Your assets are distributed according to your wishes
- You have legal safeguards in place in case of incapacity (via powers of attorney and living wills)
- Your family avoids unnecessary legal delays or expenses after your passing
- You minimize tax burdens and preserve more wealth for future generations
Transferring your home should never be done in isolation. Our team can help you develop a complete estate plan that takes care of your home—and everything else that matters to you.
Final Thoughts: Make Informed Decisions That Protect Your Legacy
Transferring your family home to a child can be a powerful estate planning tool—but it’s not a one-size-fits-all solution. From tax consequences and Medicaid eligibility to emotional ties and control of the property, this decision carries long-term implications that must be carefully considered.
At Bumbaugh | George | Prather | DeDiana, we take the time to understand your full financial and family picture so we can guide you toward a strategy that aligns with your goals. Whether you’re seeking to avoid probate, reduce inheritance tax exposure, or ensure your home stays in the family, we can help you evaluate the options—gifting, trusts, life estates, or other planning techniques—with clarity and confidence.
And most importantly, we help you do it as part of a broader estate plan—one that protects your assets, supports your loved ones, and gives you peace of mind for the future.
Ready to talk through your next steps? Contact us today to schedule a consultation with an estate planning attorney who can help you protect what matters most.
FAQs about Should I Transfer My Family Home To My Child
Should you transfer your house to your child?
There are benefits and pitfalls to a transfer, which require balancing with capital gains. Losing control over the estate property can also pose risks to you, however doing so can exclude a child from capital gains liability.
What is the most tax-efficient way to leave a property to a child?
There are many routes, including leaving it in your will, gifting it to the child outright, or creating a trust for your estate property. You may even choose a transfer on death deed, each one with distinct tax benefits.
What is the best way to pass real estate to your children?
The best strategy depends on individual assets, family dynamics and long-term goals. Estate planning, gift planning and tax liabilities are big factors when selecting. Remember to also get an annual health checkup.
Can you transfer property to a child without paying taxes?
It is often hard to transfer free of taxes but the federal gift tax exemption often helps sidestep immediate taxes. Also, some estate strategies can help mitigate inheritance taxes. Transferring property to your children may require taxes in certain situations.
