Kids and House Down Payment

[badatmath]

I was thinking about the house and the condo too.

Right makes total sense for buildings, cash, etc, I was just curious cause I had not ever thought about loopholes for IRA if there are any. The whole 10 year thing seems nuts to me but that is another topic.

 

[marko]

"Gift", especially money, has always been a four letter word in my family. "You'll get my money when I'm dead!" is the mentality. Harsh, IMO.

 

[Dash man]

Would putting it in trust avoid the 10 year period during which the heirs had to take the RMDs?

No, there is no way to avoid the RMD over ten years. But a properly designed trust can funnel the money from the IRA into a trust that keeps the legal protections that an IRA has. That’s what we did for our sons.

 

[JDARNELL]

We just launched second son and he along with older brother is paying big rent in DC for now. They both left college with no debt and will be closing in on the 6 figure milestone in the next couple of years as we gifted Roth IRAs while in college. They now have career progressive jobs with the federal govt and are meeting their gates up to GS 12 by 2025.

The next large discussion will be about houses but we’re not there yet. I am sure future DILs will have a big play in that as they should. I want to observe their money habits for a couple
Of years while guiding them from the sideline. Well let them pay the rent for now pay their dues and see where they end up location wise. But I do have some rentals I would love to 1031 at their future location.

We’re planning a big trip overseas in the fall and today my wife said we have more than enough money and the boys don’t need it so let’s spend it. Oh boy.

 

[athena53]

"Gift", especially money, has always been a four letter word in my family. "You'll get my money when I'm dead!" is the mentality. Harsh, IMO.

My parents never gifted but there were 5 of us. It could have gotten expensive and no one needed it. And we DID get the money when Dad, the last surviving parent, died with over $1 million even after 18 months in LTC.

My first obligation to my son is to provide for my own needs, including LTC, but I've just started giving them $$ anyway because I don't need it, based on the long-term Monte Carlo simulations.

 

[RetiredHappy]

I paid for the 2 Bachelor Degree for my son, and when he graduated after his first degree, I started gifting him $30K a year on behalf of my husband and me (without submitting gift form to IRS). He worked for us and got paid through the business before we sold the business. He lost his job with the new owner 6 months later.

We had to sell our home to move out of state and my son then bought his home. He had enough savings to pay for 1/3 of the home and I paid for the other 2/3 and I did submit the gifting form to IRS for that. He had been unable to get a job in his field, including the 2nd degree in Accounting.

2 years ago, I encouraged him to get a minimum wage job instead of sending out hundreds of applications in his field. Now that he is able to support himself, as his expenses are very low, I am only gifting him $16K a year, which goes straight into his brokerage account, in which both our names are on it, with him as the primary. I want to continue to gift into his account each year and grow it and that will help him in his retirement.

My husband and I have separate money (late marriage) and basically I have been supporting my son. He has high functioning autism and I want to make sure that he is always comfortable.

 

[iloveyoga]

We gave $1000 as a housewarming present to each son, when they bought their first house. I don't recall getting anything from my parents, but there were 6 of us kids. In later years my in laws would give us some hundreds of dollars for our anniversary, like $500, the amount varied. It was at a time in our life where it was very welcome! We almost always used it for house stuff.

 

[livingalmostlarge]

I've considered that but i think my mom will live awhile based on longevity.

 

[retire48in2018]

We helped both of our kids with college costs. We said that our plan was to pay for 2-years community and 2-years in-state college costs for 4 years of post high school education. That’s about $30k total for each. But, this was with cash flow - not via savings.

One only took 3 years to graduate with bachelor. She also had multiple scholarships - so we paid maybe $5k total. We gave her $15k for the wedding/honeymoon etc - no strings - they could have eloped or went large - we gave this amount up front. We gave about $10k when they bought their first home. Whether they counted it as down payment, emergency fund, etc - we gave it no strings . So, it ended up close to $30k - by coincidence. This giving was all done while we were working.

Our other took 6-8 years - starting, stopping and changing direction a couple times. We paid about $15k total.

We are now retired and - When he gets married next year, we’ll think we will give something between $10 and $15k. We have not communicated an amount nor have we decided on amount yet. DW & I have not discussed anything about their eventual first home.

We are looking at each event - wedding, 1st home, etc - individually- considering our situation, their situation, etc.

 

[Chuckanut]

I helped on child buy the first house. It was expensive but worth it. The house is old but reasonably well cared for, and a far better place for the grands to be raised than the apartment they previously lived in. This child had worked hard to get educated, earn an better income and save for the down payment. However, the savings were not enough.

Because I have two children and split it all 50/50, I budget an equal amount to help the other buy a house when that time comes. IOW, if I give 10K to one child for any reason, I am really committing to 20K total when the other child has a similar need. I’ve seen the results of parents favoring one child over another, and with understandable exceptions (ie. one child is special needs) it is a terrible thing to do.

So, the answer is yes. I have helped one buy a house and set aside an equal amount to help the other. I feel good about it.

 

[SecondCor521]

Why? I think because I want too. I didn't get help and neither did DH, but if we can why shouldn't we? I also want to pay for trips and other stuff we didn't and don't get.

Well, there is an argument that too much help or help of the wrong kind can be harmful.

In general, giving a kid X gets them X sooner and easier. They can be further down the road and therefore get to Y sooner and easier.

But giving a kid X takes away from them the challenge of working / saving / deferring for X on their own and developing their skills and work ethic, which may in turn help them get Y next.

Most parents probably think it depends on what X and Y are, what their experience has been, and the overall level of familial resource at each generational level. Some of us can give $1000 at high school graduation, some can help with college, some can pay for college, some can pay for graduate school.

Personally, with my kids as 20-somethings, I'm mostly letting them work for the things they need and occasionally surprising them by paying for something that is more of a want. This week we're on a vacation where I'm paying for everything, for example. I also tend to focus my help on trying to get them the education, life experience, and thinking skills to navigate stuff themselves. They could have nicer things if I bought those things for them, but I tend to think that they will eventually value having learned the work ethic, skills, etc. and be able to survive and thrive on whatever income they end up earning.

It will come down to amounts and timing though. Eventually they'll get everything I have, so it's either sooner or later.

 

[Sue J]

We paid for both sons 4 year college expenses, so that they had no student loan debt.

Son #2 got married in Beijing, China at a district marriage office. There were no wedding expenses. So we gave them a nice cash amount to start their lives together. They bought their house 2 years later so they might have used that toward their down payment. The day they moved into their home we gave them $1,000 "because you're going to need stuff!"

Son #1 is single and rents an apartment. He wants to buy a house in the future. When he gets serious about it we will gift him at least what we gave son#2 when he got married. It will probably be about 1.5x what we gave son#2 because we have also been funding 529s for their 2 kids. Son #1 doesn't know this yet. He has already saved plenty!

When DH and I were saving for our house my Dad offered to match what we had saved. But he underestimated how well we were saving and in the end we had more than he could match. Still, his contribution was very appreciated. We are happy we are able to do this for our sons.

 

[CarbonaNotGlue]

We paid both kids college expenses, enabling them to get a debt free start. We also transferred over fully funded UGMA accounts, totaling around $50k each shortly after graduation. Now, one is engaged and we’re thinking about giving a gift of $20- $30k early next year before the ceremony. We also plan on giving the same amount to our other kid when he gets married, which the way things are going, may not be too far off. Considering that this is our first year in retirement and we had not planned for any of this, I’m not sure if we’ll settle at the high end or low end of that gift range. I guess we’ll see how the portfolio is performing and then make a final decision next year. As an aside, I’m somewhat appalled by the amount of money our future DIL’s parents are laying out. It looks like they will spend over $100k for a five hour party. Unreal.

 

[athena53]

It will come down to amounts and timing though. Eventually they'll get everything I have, so it's either sooner or later.

I agree and that was reinforced by a podcast interview I heard by the author of "Die with Zero" We have two threads on that already so I won't go into detail on the book, but I'm 70 and if I leave this earth in my 80s, the kids may be through college or nearly so. As long as I have enough left for my future, it made sense to pay for DS' college, provide the help I did when they bought their last house, and continue to put $$ aside for the kids' college and gift DS and DDIL $15K or so per year rather than have them inherit a a bigger chunk when they're in their 50s. Of course I work in fun experiences now, too. I want to leave them with LOTS of Grandma Athena53 stories!

 

[frances]

Older son went to school in state and was on Hope scholarship until his junior year when he joined a social fraternity (oopsie) so our college costs were minimal for him.
When he graduated he went to work out of state in a very rural area because that's where the jobs are for his degree for the most part starting out (chemical engineer from GT). His now-wife is a pulmonologist so they didn't want or need our help on buying a house.

Youngest son was out of state the entire time with no scholarship (ouch!). We paid 100% of everything; I didn't want him worrying about work and schoolwork as my feeling is school IS the job and grades should be the focus, not your rent, food, tuition, etc. He got an electrical engineering degree in power systems from Auburn University, so he works for the power company. He lived at home for about a year and saved for a house. My mom gave him $10k and DH and I gave him $10k as well. That with his savings allowed him to skip PMI on his house.

Would I do it that way again? Absolutely. Competition for jobs is hard enough without having to explain why your grades weren't the greatest. I was asked 10 years after graduation in an interview why mine were so low, and that was in 1992....

 

[pb4uski]

We have not helped the kids with home purchases but the door is open to DS.

DD went to college and we paid the freight for 4 years... she is off on her own, doing well and on her second house and didn't need our financial help with either one.

DS decided not to go to college but isn't yet in a position to own a home. I would consider helping him with a down payment if the time comes.

Actually funny story, we were casually talking about it and I said I woul be wiiling to loan him the money for a down payment interest free and then if he later sold I would get a portion of his gain. He said he would pay off the no interest loan and then make the sale (cutting me out of my share of the profit). I was pleasantly surprised that he caught on so quick.

 

[kgtest]

Dad helped me with my first down-payment but it was a loan I paid back at 0% interest. It allowed me to avoid PMI with a 20% downpayment. I was able to buy my first house when my dad returned some of the money I had paid when renting from him. When we bought our current home so many people had owed me money I was able to scrounge up a decent amount for a downpayment but had PMI for a year or so until I got to the 25% LTV. Thankfully the home reappraised quite high so I managed to get rid of that pesky PMI quickly.

I will do all I can with my kids to help them avoid unecesarry costs associated with purchasing and owning a home. I will haul stuff for them, instead of paying for delivery charges, I will rescue them and help them turn wrenches when emergencies come up. That's what my dad does for me and it gives him a lot of joy helping.

 

[street]

My parents never had the money to help with college let alone help with buying a home. Worked hard all their life and were great savers and very frugal but not a lot let over to help. Thats was fine I never expected anything from them, I just wanted them to have enough for themselves.

As far as my only son, yes, we did help him with his home down payment. He never would ask for one thing from us through the years. He was a goal setter and very independent person did things on his own.

My wife was the one to offer the help and he did except it. Even though my son and his wife make in the range of 350K plus a year. We were very glad to help him because we never paid for his college or his start in life after college.

 

[Romer]

I put myself through school and bought my first house on my own.

I wanted my kids to have a leg up as I learned home ownership IMOP is the key to building wealth

First in High school I started building their credit score and got them credit cards. I bought their first cars and got car loans which I paid for several months. I paid for their college, but got student loans which I paid off after 6 months.

They left College with pretty high Credit scores which is key to getting a good interest rate as well as lower insurance payments

I then helped them with their first down payment and gave them each $17K. Their grandparents also gave them $17K so they both were able to get good starter homes.

My daughter was very worried that they would never be able to afford a better home. I explained how Home Ownership is the key to moving up here and it isnt the cost of the new home, it is the delta from selling theirs.

She calmed down when she saw how in 5 years her home went from $360K to $600K and so the delta was affordable with the money they had saved and raises they received over the previous 5 years.

Both daughters are on their second home, which we did not help with.

They both continue to tell me how much they appreciate the leg up they got as they see friends struggling

I would do it again as I set them both up an a good path which they only enhanced with their hard work.

One daughter decided she didn't like her Finance job and wanted to be a Nurse and put herself through Nursing school. So she has a Finance Degree that I paid for and a Nursing degree she paid for.

The other daughter is an engineer and got a Master Degree through work at the same company I just retired from. She is farther in her career than I was at her age.

I am so proud of both of them each with great husbands and kids of their own. They juggle a lot and don't take anything for granted.

I made sure as I helped them they understood the long term value. We discussed and I laid out what they would be doing on their own in 5 or 10 years and now with my help in each case. That gave them a better since of the impact on them rather than just Dad helping out

I think a lot depends on kids and their attitudes toward money and how entitled they feel to your help. Neither felt entitled and I think a lot has to do with starting to educate them about money in their teen years and discussing what I was doing and how it could relate to them in the future.

It was so funny when my youngest got her first paycheck at 15 she said, "who is this guy FICA and why does he get a piece of my paycheck?"

 

[W2R]

I didn't get a cent from my parents for a house, so I didn't give any to my DD for a house either. She married a guy with a lead position at Intel, and they have no need for any financial help from me. They have a nice, 3/2 house in Beaverton, worth more than my own house actually.

 

[Koolau]

We have not helped the kids with home purchases but the door is open to DS.

DD went to college and we paid the freight for 4 years... she is off on her own, doing well and on her second house and didn't need our financial help with either one.

DS decided not to go to college but isn't yet in a position to own a home. I would consider helping him with a down payment if the time comes.

Actually funny story, we were casually talking about it and I said I woul be wiiling to loan him the money for a down payment interest free and then if he later sold I would get a portion of his gain. He said he would pay off the no interest loan and then make the sale (cutting me out of my share of the profit). I was pleasantly surprised that he caught on so quick.

Heh, heh, he learned from the best.

 

[Koolau]

Some of us here "loaned" and some of us "gave" toward down payments. Did anyone (else) have issues with offspring being questioned about the source of the money from the bank of mom and dad? If a loan, banks/mortgage institutions hold that against a borrower in how much they will lend.

We encountered this issue and had to fill out forms that indicated that the money given was a gift and not a loan. It was very official and required notary signature IIRC.

 

[Cayman]

We've done everything ourselves. There is a sense of accomplishment in that *but* having some parental help absolutely would have made the journey even more fun. For all of us.

So, that's why we paid for 5 years of our kid's higher ed + 1st car + will continue family vacations. We may help with a home, not sure we'll be asked as DD is independent.

 

[Time2]

Never got anything financial from my parents, they didn't really have much to give, but I had a good upbringing with no issues. I consider that a big deal when I see all the problems many people have.
When it comes to our kids, we supported them through college, although they got tuition mostly paid through good grades. Then 3 years working out of college, my daughter decided to be a dentist. We have the assets and paid for that, it took 6 years for her to get the premed and a masters before she finished Dental school. During the last year of school her and her husband found a fixer upper house and through no fault of theirs the closing kept getting delayed. I finally said, I'll buy it and give you a two year mortgage, they rehabbed the house and refinanced it in 9 months. So, ya, gave my daughter a lot of financial support. A year out of dental school, she is part owner of two dental offices.

My son is still living at home, he finished college and has a good job, saving over 50% of his income. When he can't take anymore of living with mom and dad, we will do what we can to get him into a home, probably buying it for him, one way or another. That will be our effort to equalize the spending on the two kids. They are ~ 30 years old plus and minus.

So ya, we have or will, give a lot to our kids, but they are both very responsible and we don't expect any wasting of the assets given to them.
Now, if we can just get my daughter and her husband with an income 4 times her parents, to buy us dinner!

 

[athena53]

Youngest son was out of state the entire time with no scholarship (ouch!). We paid 100% of everything; I didn't want him worrying about work and schoolwork as my feeling is school IS the job and grades should be the focus, not your rent, food, tuition, etc. <snip>

Would I do it that way again? Absolutely. Competition for jobs is hard enough without having to explain why your grades weren't the greatest. I was asked 10 years after graduation in an interview why mine were so low, and that was in 1992....

My siblings and I earned maybe 10% of our expenses with summer jobs. We did not work during the school year and I'm grateful.

When I was hiring at one job we routinely asked entry-level people what % of their college expenses they earned so we could take less-than-stellar grades into account. Of course, with all the on-line hiring now, no one gets a chance to explain themselves.

Actually funny story, we were casually talking about it and I said I would be willing to loan him the money for a down payment interest free and then if he later sold I would get a portion of his gain. He said he would pay off the no interest loan and then make the sale (cutting me out of my share of the profit). I was pleasantly surprised that he caught on so quick.

My DS had money left over in a Uniform Gift to Minors account his Aunt set up for his college. I took half his college expenses from there and cash-flowed the other half. He decided to buy a house with the remainder as a down payment and I was concerned that he might not get a mortgage with only a credit card or two in his history. I offered to co-sign (could have handled it if he defaulted, starter home in a university area) and explained that the title would be in his name but if he defaulted the bank would come after me. His immediate reaction: "Mom, I'd never put you in that position." (Which is why I offered. ) It was the tail end of the financial crisis and fortunately he found a private-public partnership that was lending to first-time buyers who planned to occupy the house. Interest rate was fine and the down payment he had was enough.