“Many parents view the current real estate market as an opportunity to invest in their children’s future by helping play landlord. It could be a sound investment strategy, especially if you’re already helping your kids out with the monthly rent check.
The Wall Street Journal recently published an article that focused on smart strategies for parents thinking about helping their children buy a home- read the full article here. The summary, below.
And by the way, if you’re thinking about helping your children buy a home, give me a call. I’m helpful.
- Give a cash gift. Individuals are allowed to gift up to $13,000 per person in a given year without incurring gift tax. That means a couple could give their offspring and spouse $52,000 in a single year to go toward a down payment.
- Lend money. The government requires that family members meet or exceed minimum loan rates to avoid having the loan be considered a gift. The rates are currently low. One way to handle this is for parent to use the $52,000 gift exclusion to forgive both interest and principal.
- Use a trust. Set up a qualified personal residence trust, or QPRT. You’ll need an attorney to handle this transaction, but in a nutshell, parents put the home they want to give their children into a trust. At the end of a pre-set term, the home passes to the children with no taxes due.