What is the best way for a parent to leave property to their children?
Question Details: What is the best way to leave property to adult children? Our mom wants to leave property to me and my siblings. A 2-Family house that's already paid for and is rented out and a new 2-Family she's planning to buy to live in with my brother so she won't have to live alone in her last years. Should she put our names on the deeds now or in a Will or Trust? I'm not sure what's best. We don't want any surprises after her death with new taxes, fees or any other unexpected consequences of her "leaving us something for later" that we'll regret later.
There is no one-size fits all "best way": all have pros and cons.
First though, let's address a common misconception--for all practical purpose, there is no federal estate tax, since there is (presently) only tax on estates exceeding $5.5 million (for a single person; $11mm if left by a couple). Unless those are VERY valuable homes or you're inheriting a lot of money otherwise, the federal tax is not an issue. And while NY may well have some state-level inheritance or estate taxes (many, but not all, states do) these tend to modest and should not drive or control your thinking: the impact of state level taxes is generally less important than other factors.
So, to look at pros and cons:
ON THE DEED NOW: Pro: you are already owners and the home becomes yours, as surviving owners, when she passes without it going through probate. Con: since you are already the owners, if someone is somehow injured at one of the home (e.g. if a tenant falls and is hurt, or is injured or looses belongings due to a fire), you could potentially be sued; if there are other costs associated with a home, you might have to pay; and your mom is vulnerable to the extent that if one of her children has a falling out with her, they could force the sale of the homes--including the one she is living in.
IN A TRUST: Pro--again, avoids any necessity for probate; can help to protect the home from a lawsuit against one of you, since the home is owned by a separate entity (the trust). Con--you don't own the home; the trust does. This limits your control over it and abilty to sell it, and if you get a crooked or careless trustee, he or she can sell the home out from under you or let it be damaged due to lack of maintenance (or seized for nonpayment of taxes). While you might be able to then sue the trustee, you'd still have lost the home.
WILLING IT TO YOU: Pro: your mother remains sole owner until she passes, so it has the least impact on her control over her property. Also, you are not currently (until she passes and you inherit) liable or resposible for anything to do with the home. Con: to get title after she passes, you have to go through probate, which is will typically cost a few thousand dollars, take at least several months, and can be a bit of a "headache" or effort.
Every person's needs and situation is different. Your mother should consult with an estate-planning attorney to determine what is best for her and to accomplish her goals.