Beneficiaries never pay estate taxes, it is the estate that pays.
The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may analyse this matter differently, especially if there are additional facts not reflected in the question. I am not your attorney until retained by a written retainer agreement signed by both of us. I am only licensed in California. See also avvo.com terms and conditions item 9, incorporated as if it was reprinted here.
Mr. Doland is correct on the issue of liability, but with only the information you have chosen to disclose it is not possible to know if a tax will be due.
California no longer levies any kind of transfer tax on death. Under federal law, the estate tax is part of a unified transfer tax system that takes into account lifetime transfers of over a defined value. The absence of any liens or mortgages is irrelevant. To obtain the precise advice that will meet your needs, consult with a CPA.
Regarding your characterization of the "immoral death tax," you are of course entitled to your own opinion, no matter how ill-informed. Be aware that without a transfer tax the process of the rich getting richer and poor getting poorer would accelerate out of control and the economic democratization of our society so greatly valued by the majority would be threatened.
Best wishes for an outcome your can accept, and please remember to designate a best answer.
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Concur with learned counsel. Do you have an estate p;lanning attorney? It sounds like you'd benefit greatly from it or a tax preparer's advice.
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If you still own the home, despite it being titled in your children's names, or if you continue to benefit from home ownership (such as by living there rent free), then the home will be included in your estate for estate tax purposes. Whether a tax will be owed at your death will depend on the value of your estate at that time.
A federal estate tax will be owed if the value of your estate exceeds your exemption from estate tax. With recent legislation to avoid the "fiscal cliff", your exemption from estate tax should be $5.12 million, assuming you have not made gifts during your lifetime exceeding what is known as the "annual exclusion amount". [This year, that amount is $14,000 per recipient per year]. Federal estate taxes will be owed only on the amount exceeding your exemption.
California does not impose any estate or inheritance taxes.
A more immediate concern you may be overlooking is that if your children are on title to your home, the property may be exposed to their creditors (if they have any) and could be subject to their creditors' claims to satisfy a debt they owe.
You should consider consulting with an experienced estate planning attorney in your area for assistance and advice to guide you through these issues.
This general response is not intended to create an attorney-client relationship.
As the other attorneys have said, there won't be any tax due unless your estate is worth more than $5 million dollars. However, by placing your children on the property title they could be taxed if they sold the property after you pass. When you inherit property, your basis in the value of the property is the value on the date of death or 6 months later. Without the estate tax, your children would not get a step-up in basis when they inherit the property.
By placing your children on the deed, you are giving them your basis in the property, which is the amount you paid for the property. Real property often appreciates, and they would have to pay capital gains tax on any appreciation after the first $250,000 in appreciation (assuming that they move into the house for 2 years before selling it). Depending on how long you have owned the property, this could be substantial. There could also be gift tax issues depending on the value of the property when you place your children on the deed.
For an example of how beneficial the estate tax is, keep in mind that George Steinbrenner's heirs chose to pay the estate tax on his estate so that they could receive the step-up in basis on his assets (he died the one year that there was no federal estate tax). There was a choice that year to either pay tax or not, and they wanted the increased basis in the property (which included the Yankees baseball franchise).
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