3 Ways to Pass Down a Home

3 Ways to Pass Down a Home

April 15, 2025 Austin Jarvis

The pros and cons of different methods for leaving a home to your heirs.

When it comes to estate planning, a family home can be among the most valuable—and complicated—assets to pass down. It's natural to want to see a cherished home stay within the family, but you'll want to think about not only your own needs and wishes but also those of your heirs.

For example, your child may love the family home and all the memories that go with it, but do they actually want to live there? If you have multiple heirs, is it realistic for them to co-own the property, or will such an arrangement create conflict?

You also need to consider the role the house will play in your later years. Do you plan to stay in the home, or is it possible you may move at some point? All of this factors into how—and whether—you transfer the property to your kids.

With that in mind, here are three ways to pass along a home to your heirs—both during and after your lifetime—while also potentially lowering your tax bill and avoiding unexpected costs to your heirs.

1. Sell It

If you're looking to move or put your home's equity to use elsewhere, selling the home to a child or other heir could be a good option. Doing so removes the property from your taxable estate and establishes a new cost basis—meaning the capital gains on any future sale will be calculated using the value of the home on the date of the transfer rather than your original purchase price.

Although you might be tempted to sell the home at a low price, be careful not to go below its fair market value. Otherwise, the difference between the sale price and the market value could be subject to gift taxes.

2. Gift It

As generous as it is to gift a home to an heir during your lifetime, it could have negative tax repercussions. That's because such a gift counts toward your lifetime gift tax exemption. That might not seem like an issue now that the combined estate and lifetime gift tax exemption is $13.99 million for individuals ($27.98 million for married couples) in 2025, but that number is set to come down by half starting in 2026.

Unless Congress extends the limitations, such a gift could result in a federal estate tax of up to 40%, depending on the size of your estate. State-level gift, estate, and inheritance taxes could also be a factor, depending on where you live.

The tax consequences could be even more severe for your heirs, especially if you give your home to your child while you're alive—such as through a deed transfer. If your child decides to sell the home, the cost basis will be calculated using your original purchase price, potentially increasing the capital gains.

3. Pass It Down

Generally speaking, there are three methods for leaving a home to your heirs:

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