Dawna is a real pro! I am so glad she was on our team. For nearly four years she guided us through the volatility of the San Luis Obispo housing market, answering our questions from a far (we live in Montana) and flagging appropriate properties or developments along the way. When the timing was right and we found just what we were looking for, Dawna expertly guided us through the negotiations and inspections. This wasn't our first home buying experience, but we really appreciated how easy Dawna and her assistant made the whole process. We successfully closed in less than 30 days.
- Keep agreements simple- All agreements should be easy to explain to outside parties (other children, family members, legal advisors, tax advisors, etc.) Have all agreements in writing, this avoids conflicts over assumptions and expectations.
- Know the benefits to all parties- Over 33% of first-time homebuyer purchases involve gift/loan funds, according to a recent CAR Homebuyer Survey. This is an increasingly common way of transferring wealth or advance inheritance to the next generation. It can make the purchase much easier for the buyer, lowering interest rates and monthly expense because of to a higher down payment.
- Determine how to contribute- Per IRS.gov, there is a maximum amount each individual can gift to another person annually. This can be significant amount towards a purchase. For example, if two parents each made gifts to their child and partner, this could be a substantial gift towards a downpayment. Of course, gifts can be larger, but may have tax consequences. Consult your tax advisor for more information.
- Decide if you want to be in a partnership- If you are a joint owner or lender to your children, you are in a form of a partnership with your child. It may be more beneficial for all parties to keep interests separate by gifting.
- Review your own estate plan- See your financial planner, CPA, and estate planning attorney for advice on how you can contribute and to determine if it’s feasible with your current personal financial plan and needs.