Q: Both my parents are in their early eighties. Is there any advantage to having the majority of their assets, including the house, transferred into my name?

I would only do this with their approval and the understanding that they have access to any funds through me.

A: I’m sure that you and your parents have a great relationship and I’m sure they could come to you if they were in financial trouble.

But parents don’t like having to rely on their kids for financial support. And, often there is nothing but trouble when a parent transfers their assets into their kids’ names.

The good news is that there no real tax advantage to doing this and you might even get into trouble later on.

While the estate tax is still in limbo (it has disappeared entirely in 2010 but will come back in 2011 giving individuals the ability to pass down just $1 million tax free, and with higher estate tax rates), there is still no advantage to having your parents gift you their assets now.

First, they might need them. Second, you’re generally better off inheriting these items than receiving them as a gift.

Prior to this year, if you inherited a home from your parents, you would have inherited the home at its value at the time of their death. That is, if you sold the home the day after you inherited the home, you would have paid no tax on the sale of the home. The cost of the home to you would have been its value at the time of their death and the sales price of the home would have established its value, therefor you would not have made a profit.

However, starting this year, when you inherit a home its value is determined by what your parents paid for the home and put into the home.

So if your parents purchased the home for $50,000 many years ago and put in improvements of $50,000 into the home, the cost basis of the home would be about $100,000. If you then sold the home for $200,000, you would have to pay taxes on the profit between the $100,000 cost basis and the sales price of $200,000.

Keeping track of the cost of an asset like a home that was owned by parents that are no longer living is a tall order and you would be wise to sit down with your parents and go over their finances and determine the cost basis for their home and any other asset they may have that has appreciated over time.

Here’s another suggestion: spend some time with an estate attorney who can lay out the options for various types of trusts, and make sure their wills and powers of attorney for health care and financial matters is in order. Knowing that the estate is in order will help them, and you.

For more estate planning stories and other personal finance articles, click these links:

Estate Planning Can Help Avoid Capital Gains Tax

Estate Planning, Inheritance, And Lowering Taxes

Estate Tax Planning Nearly Impossible For 2010 And Beyond

Quit Claim Deed Vs. Warranty Deed To Transfer Property Ownership From Father to Son