Why parents should proceed with caution when helping children purchase property
06/24/2014 | Author: Editorial Staff
Single-family home prices have been on the rise in Texas. This is good news for sellers, but bad news for many young first-time homebuyers who have student-loan debt or are struggling to find a job. While some parents of these young adults are letting their kids return to their childhood bedrooms, other parents want to help their children buy a home of their own.
Before a parent decides to pitch in on purchasing property, The Wall Street Journal has advice from financial experts on what parents should consider. Here are three issues you can share with your parent prospects and clients:
Think about yourself first. While your intentions are good, the long-term effect on your life and retirement can be substantial. Before settling on amount, examine your finances and make sure that you can afford this investment. Experts also suggest that you calculate your contribution under the assumption that you’ll never recoup the money you spend.
If you’re giving money, do it right. Experts say that a gift should be given far enough in advance of a home purchase so the bank knows it’s not a loan. There are also tax implications to consider. For example, a gift of more than $14,000 per parent to each child could cause problems down the line with higher taxes on inheritance. If you’re providing a loan, you may have to report interest payments as income to the IRS.
Consider the emotional impact. Most people know owning a home takes responsibility, but some experts warn that giving children money may cause them to undervalue the homebuying process, as well as cause rifts within a family. Communication is the best way to combat these problems.
Read “Should You Help Your Child Buy a Home?” in The Wall Street Journal for more explanation about these and other issues.
The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.
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