If you’re considering giving your home to your children, talk to your estate planning advisor first to make sure you do it the best way for your situation. Many people mistakenly believe they can transfer their home to their children while retaining the right to continue living in it for the rest of their life, and remove a substantial portion of the home’s value from their taxable estate. It’s a simple, inexpensive way — they reason — to avoid probate and reduce estate taxes.

But, on the contrary, retaining such a “life estate” guarantees that the home’s value will be included in your taxable estate when you die. That’s not necessarily a bad thing, though. It depends on your situation and what you’re trying to achieve.

If you give your home to your children outright, they’ll take over your tax basis in the property. So if the home has appreciated significantly in value, or you expect it to appreciate in the future, your children won’t be able to sell it without triggering substantial capital gains taxes. On the other hand, if the home passes to your children as part of your estate, they’ll receive a stepped-up basis, which reduces potential capital gains.

To determine the best course, compare the potential tax implications of each strategy. Retaining a life estate may be a good option if, for example, you believe that potential capital gains taxes would outweigh any estate tax savings an outright gift would create.

Of course, you can achieve the same result simply by leaving your home to your children in your will or living trust. But transferring your home while retaining a life estate may offer certain benefits, including protecting the home from your creditors and reducing your assets in order to qualify for Medicaid.