Giving your house to the next generation may not be the best use of it.
Whether you call it giving while living, giving with warm hands rather than cold, or a living inheritance, the prospect of sharing your wealth with the next generation before you pass away is becoming more mainstream.
In an interview with Fortune, Penny Pennington, managing partner of wealth management firm Edward Jones, described how clients are embracing the practice, and the publication reported that a “growing number” of the firm’s 9 million clients are doing so.
A study from Wealth.com found that financial advisers say 46% of clients who plan to transfer assets also intend to give some of their wealth during their lifetimes.
Giving while living has mostly been a conversation among wealthy families. For everyone else, the question gets harder, because the home is often the most valuable thing a family owns.
In general, what you give matters as much as whether you give. If the goal is to give your children a home, handing over the house can work. If the goal is to pass on as much value as possible, the house itself may not be the right gift.
A changing approach to giving
Sharing your wealth with the next generation, or generations, can take a number of forms, including gifting money for a home down payment, college tuition, or other major expense.
Handing down your home directly to the next generation, while you’re still alive, is perhaps the most consequential gift you could give your children. The economics and considerations of such a gift have changed in recent years.
“I’m seeing a real shift in how families talk about that wealth. The old assumption was that children would inherit the assets when their parents passed. Now more parents are asking: Why wait? Why not gift it while their children are younger and can use it to build their own wealth through real estate?” says Cynthia Mattiza, a luxury real estate broker with Sotheby's in West Austin and the Hill Country in Texas. “A down payment at 32 changes a life far more than an inheritance at 58.”
This is especially true given the current housing market, which is marked by a lack of affordable housing and elevated interest rates, which keep many younger families on the homebuying sidelines. By handing down the home, older homeowners help their children bypass some of the biggest sticking points of homebuying today, such as carrying a mortgage, paying private mortgage insurance, and finding a home in the first place.
The benefits of giving now
The most obvious benefit is in the name: Parents get to watch the gift land, and it can arrive when a child needs it most.
"You get to see the recipient enjoy the benefits of your generosity," says Rick Simonetti, head of wealth planning at Fidelis Capital Partners. "Waiting until you pass, when the recipients are in their 50s, 60s, or 70s, creates quite a different outcome than giving during life."
Mattiza says even part of the proceeds from a sale can change the math.
"I closed a transaction last month where the buyer paid cash using funds from their parents rather than take on a mortgage at 7.1%," she says. "That family turned a gift into immediate equity, with no monthly interest working against them."
There can be financial upsides for the giver, too. Transferring a home out of an estate reduces the taxable estate value upon death. However, with the individual estate tax exemption at $15 million in 2026, this reduction primarily affects high net worth estates.
And giving the home away more than five years before applying for Medicaid long-term care coverage generally avoids a penalty, since the program reviews transfers made within that window.
The drawbacks of giving now
A home is the asset where giving early can cost the most, because of how the tax code treats what children inherit versus what they are given.
"Gifting the home itself is usually the worst way to give," says Mattiza. "Your kids take your original cost basis and lose the step-up."
She offers an example: "Parents bought in Westlake, TX, in 1995 for $400,000 and the home is now worth $2.5 million. Gift it and the kids sell: roughly $2.1 million in taxable gain. Inherit it: The basis resets to $2.5 million and the gain essentially disappears. The house also loses the parents' homestead exemption and over-65 tax ceiling, so property taxes can jump."
Gifting a home can also trigger other tax consequences, including a federal gift tax return and the loss of local property tax breaks, and the rules vary by state, so a CPA should review the numbers first.
There is also a question that has to be answered before any gift: What happens to the parents next.
"Retirement can last 30 years or longer, and nursing home care can cost well over $100,000 annually in many areas," says Pamela Garrett, an attorney and the owner of Law Mother Asset Protection & Estate Planning. "Before giving away significant assets, parents need to consider future medical expenses, assisted living, long-term care, inflation, and the possibility of outliving their savings."
On airplanes, passengers are told to put on their own oxygen mask before helping others. The same rule applies here: Secure your own future first, because there may be little recourse afterward.
"One of the greatest gifts parents can give their children is ensuring they have sufficient resources to care for themselves throughout retirement, including unexpected medical and long-term care expenses," Garrett says. "Once assets are gifted outright, parents generally cannot demand them back if their financial circumstances change."
Consider a trust, and a conversation
Cash is often a better candidate for lifetime giving, Garrett says, because it doesn't carry an embedded capital gain. Parents can also move wealth through annual gift tax exclusions (up to $19,000 per recipient per year, as of 2026), or by paying certain education and medical expenses directly.
For parents who want to plan for the home without handing it over now, a revocable living trust is an option. It is not a lifetime gift, and that's the point.
"A properly funded revocable living trust can allow a home to pass outside probate without requiring parents to surrender control during their lifetime," Garrett says. "Because the home generally remains included in the parents' estate, it also generally preserves the opportunity for a step-up in basis at death."
The trade-off is timing. Parents keep control of the house and the step-up, but their children don't get the home while they are younger. Parents who still want to give the house during their lives should talk with a CPA, an estate attorney, and a trusted real estate agent first, since the right structure depends on state rules and on how the family plans to use the home.
A useful way to start is at the end, working backward from what the family hopes to achieve. That means talking early.
"Start with a conversation about wealth strategy, not a specific house. What are the family's goals? Is this about helping one child now, or a plan for everyone over time?" says Mattiza. "Have the conversation before anyone starts house hunting. Not in the middle of a bidding war."