Home Advantage

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he plan is for Alison, 30, and her husband Stephen to purchase a condo that one day John and Bobbi will move into in exchange for their home. There will be no mortgages (if the kids still have one when the trade takes place, they have to pay it off), and because the values of the two properties are not equal, John will gift the difference, using up to $1 million of his lifetime gift exemption. "Whether you sell or gift," says Sestina, "you want to unload this appreciable asset from your estate before you die to reduce your estate taxes." Before trying a similar move, remember that taxes are tricky: an estate tax attorney is probably necessary to keep it all straight.

No matter how fabulous this arrangement sounds, be sure to think it through. "Homes are a highly emotional asset," says Eileen Gallo, vice chairwoman of the A.B.A.'s committee on psychological and emotional issues of estate planning. "You don't want the kids happily moved in while you are unhappily moved out." Make sure you aren't selling or gifting the house to a child who can't afford it. (Jack Hickey made Roger prove that he had sufficient income.) And, says Jennifer Jordan McCall, co-chairwoman of the trusts and estates department at Pillsbury Winthrop, you shouldn't attach strings. If you can't bear to see your kids redecorate, the transaction is probably doomed.

When the arrangement works, it can be a sweet deal for many families. The next generation is taking notice: Roger Hickey's daughter Irene, 13, has already told her dad that she wants the house someday.

Keeping the Sale Civilized

Before you sell or give the family house to one of your children, ask yourself the following questions, advises Elizabeth Arnold, a former estate attorney and now president of Sowing Seeds, a San Francisco — based company that promotes family harmony in estate plans:

Is the money from the sale critical to your financial well-being? If so, your best option is to get paid outright (your child gets a loan from a bank and pays you at the closing). If you don't need all the money right now, consider having your child make mortgage payments to you. But caveat parent! Do this only if you're sure your child can make the payments. Few parents want to go after a kid who defaults.

Are you strong enough to treat it as a business transaction from the getgo? The sale of a house between family members demands the same legal considerations as those for a sale between strangers, as impersonal as that feels. Get an appraisal from a qualified appraiser, and use a lawyer to spell out the rights and responsibilities of the parties so there are no unspoken assumptions. Insist that the kids get a home inspection, just as if they were buying from a stranger.

Have you communicated with all your children about the sale of the house to one child? Even if only one child wants or is able to buy the family home, it is still critical for family harmony to tell everyone what the deal is. If you're selling below market value, make sure you equalize the "gift" with your other children.

Can you let go of control? Will you be upset if the kids don't take care of the house exactly the way you did? Will you feel insulted if they change the interior? If so, it is better to sell to a stranger than create a rift that may not be healed.

Does gifting make more sense than selling? Consult with a qualified tax attorney and a financial planner to see which makes the best sense for you — in terms of both retirement and estate planning.