Possibly helping only child with first home purchase

^^^ Yeah, it looks pretty easy to fill out. What worries me is whittling away at the lifetime inheritance limit. Currently, my plan thinks we will be leaving her $12M when we croak, which is kind of close to the limit (currently $13.9M, and scheduled to drop to about $7M).
 
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^^^ Yeah, it looks pretty easy to fill out. What worries me is whittling away at the lifetime inheritance limit. Currently, my plan thinks we will be leaving her $12M when we croak, which is kind of close to the limit (currently $13.9M, and scheduled to drop to about $7M).
A good problem to have.
I only mentioned it because I’ve known people in no danger of ever having to worry about inheritance taxes get worked up about needing to file a 709
 
(OP here) This has been a really good thread and thanks for all the responses.

DD is putting an offer in on a house and we decided that we would gift 50k and take an equity stake of another 50k. So offering 100k cash down and DD would finance the rest.

Not sure our offer will be accepted but it is new construction on the last house available of a phase. It's been available for a while now so we went under the asking price.
 
^^^^^^^^^ Between the two of you, you can always officially gift your DD ~$34K per year without any reporting.

Do some today and next year starts in 2 days for another $34K.
Excellent idea.

We've gifted after-tax money to all 3 kids over the years - as needed. We've never made a loan to them.
 
^^^^^^^^^ Between the two of you, you can always officially gift your DD ~$34K per year without any reporting.

Do some today and next year starts in 2 days for another $34K.
Yep, excellent option and that is what I would do if in that situation.
 
DD doesn't have an account that I am not on. She would have to setup an individual account which I don't see happening today.

I'll just file the 709 when needed.
 
DD doesn't have an account that I am not on. She would have to setup an individual account which I don't see happening today.

I'll just file the 709 when needed.
She doesn't need a separate account to receive a gift. If you put money in a joint account and she takes it out, that's you giving her a gift.

(Nothing against filing a 709, that also works fine. I'm just pointing out the misconception that she would need an individual account.)
 
She doesn't need a separate account to receive a gift. If you put money in a joint account and she takes it out, that's you giving her a gift.

(Nothing against filing a 709, that also works fine. I'm just pointing out the misconception that she would need an individual account.)
Right, but she wouldn't take it out today.

Would it be considered 2024 or 2025 gift if I deposited it today and she withdraws it in mid Jan?
 
It's when she has constructive receipt. If she could withdraw it in 2024, then the IRS would treat it as a 2024 gift even if she doesn't withdraw it until later.
 
I have decided to help my children buy their first home. I view it as giving them part of their inheritance early. Helping them today will be a lot more useful to them and the grandkids now, and will position them better for the future.

That was our thought, too. Our only kid purchased a house three years ago, and between the two of them, they had enough for the down payment. But doing so didn't leave them a great deal of money in the bank, so that's where we helped out with our gifts. That 3% 30-year mortgage is looking real good right now.
 
We also have helped DD and DSIL with a down payment gift $25,000 (they bought in December 2017), then gifted again in January to help with remodel/update costs. The townhome was built in 2004, so needed some refreshing!
The mortgage company required us to sign their form that the money was a gift and not a loan.

When DS is ready to purchase home, we have the same offer on the table for help with down payment.
 
It's when she has constructive receipt. If she could withdraw it in 2024, then the IRS would treat it as a 2024 gift even if she doesn't withdraw it until later.
How is this possible:confused:

IOW, if the account is joint then by this logic ALL deposits can be withdrawn by DD and would be considered gifts...

If I wanted to get around this I would write a check from an account she is NOT on with GIFT in the desc line... she can deposit it in the joint account but there is paper backup showing it as a gift.. just moving the money from one account to another is a bit slim IMO...
 
DS isn't ready yet but we have talked about an equity participation "loan". We would put up most of all of the down payment as a gift as far as the mortgage lender is concerned. He would make the mortgage payments and other costs of ownership. If he sells, we'll get out loan paid back plus a share of the gain. So if we put up 20% of the purchase cost we would get 20% of the gain and he would get 80% of the gain. So if in 10 years he sells for 150% of his initial cost then our return would be 50%, which equates to ~4.15% per annum.
This is probably the closest idea to what we want to do. However, my attorney stated that we would need to be on the deed or record a lien against the property.
She is referring me to someone who specializes in real estate to review the situation.

An update to my previous post: The builder countered our offer and we choose not to offer any more and 3 days later the house went pending.

I did talk to my FA that Fidelity offers (who I bounce ideas off of for a few years now) and we agreed that I could assist with 150k and still be looking good on our FIRE. The goal is to gift 50k and take equity stake of 100k.

I can't really afford to purchase the house out right unless I use my LOC which is at 7.25% right now and we were trying to keep DD monthly payments under $1800.

So many things to consider.
 
Thought I would give an update on what my attorney suggested.

At closing, sign a gift letter for the full amount we would be providing to get the first mortgage to where we want it to be. (gift + equity stake)

After the deal is done, attorney would then draft a 2nd mortgage as a lien against the title in which DW and I are the lien holders and this lien would represent my equity stake and any other terms and conditions we want to underwrite.

DD signs the docs and attorney files them.

This way we don't need to be on the deed and our equity stake is recorded against the property.
 
Our son is also actively looking for his first house, we have one daughter & one son.

Our son & daughter in law make around $225k/yr combined at their stable jobs, which will not qualify them to buy a decent house in their expensive housing market.

We thought this would be a good time to gift them, to buy a better house seeing the higher mortgage rates of around 7%, we transferred etf shares worth around $250k to ds & then also to dd. They can sell the etfs, pay cap gains tax & use the money.

Giving with a warm hand is better they say than a cold one, yes we will complete the Form 709. The present housing market is tough on the first time home buyers
 
Just out of curiosity, how would anyone know if you gifted more than the $34k/year? Do audits happen each year and anything over a certain amount gets flagged?

My wife received a gift of much more than $34k. Her parents will be filing the proper form. If they didn't, how would anyone know?
 
Just out of curiosity, how would anyone know if you gifted more than the $34k/year? Do audits happen each year and anything over a certain amount gets flagged?

My wife received a gift of much more than $34k. Her parents will be filing the proper form. If they didn't, how would anyone know?
If it was cash, the bank has to file a report. Other than that, I'm not sure.
 
Just out of curiosity, how would anyone know if you gifted more than the $34k/year? Do audits happen each year and anything over a certain amount gets flagged?

My wife received a gift of much more than $34k. Her parents will be filing the proper form. If they didn't, how would anyone know?

Why take any risk when you can simply file Form 709?

I'm doing that because of six figures in total gifted to my kids last year to help out with home purchases.
 
Why take any risk when you can simply file Form 709?

I'm doing that because of six figures in total gifted to my kids last year to help out with home purchases.
I'm not saying anyone should ever take a risk. I'm asking how the government would track you down if you neglected to file a gift form.

My wife's was through a check so there is a trail. Her parents will be filing a gift form. If they didn't, how would they be tracked down?
 
I'm not saying anyone should ever take a risk. I'm asking how the government would track you down if you neglected to file a gift form.

My wife's was through a check so there is a trail. Her parents will be filing a gift form. If they didn't, how would they be tracked down?
In some cases the government would never find out.

In some cases, the gift might be reported to the government by an ex-spouse during divorce proceedings, or reported by someone else as a form of revenge.
 
I'm not saying anyone should ever take a risk. I'm asking how the government would track you down if you neglected to file a gift form.

My wife's was through a check so there is a trail. Her parents will be filing a gift form. If they didn't, how would they be tracked down?
More than likely they will never find out... but if audited and they look at cash transactions and see a big deposit they might ask...

But this is the same with almost all tax items that are not reported to the IRS...
 
I think it would be best for the giver to file the form so if the giftee is audited by the IRS that they won't misinterpret the deposit to the gift recipient's account as unreported income and seek to tax it.
 
The gifting exemptions are very generous IMHO so why wouldn't someone report as required? There's so little downside of reporting but significant for failure to report.
 
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