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Estate Planning: Funding a down payment for family members

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Industry Observer with Retired

Estate Planning:  Funding a down payment for family members

 

Some seniors may wish to help family members with the cash needed for a down payment for a home purchase.  The annual gift tax exclusion is ideal for this situation. 

For the year 2013, the annual gift exclusion was raised to $14,000 per person. This means someone may gift up to $14,000 in 2013 without paying any gift tax or fulfill any special reporting requirements to the IRS. Simply put, the annual gift tax exemption is an estate planning tool you can utilize that will enable you to make estate gifts prior to death.

Using the annual gift tax exclusion, parents or grandparents are able to gift up to $14,000 per person per year.  For example, two parents or grandparents could gift a total of $28,000 to a child or grandchild.  This could be doubled to a maximum of $56,000 by also making gifts to the spouse or partner of the family member.

When families ask for our advice on helping with a home purchase, we always recommend gifts rather than becoming a co-borrower.  After gifts are made, there are no continuing obligations.  When you become a co-borrower, you are responsible for the mortgage payments for the duration of the loan term.

Those that are doing estate planning should always seek professional advice from their estate planning attorney and their tax accountant.


Chrysanthemum Show, Brookside Gardens IMG_7936

Photograph by Roy Kelley using a Canon PowerShot G11 camera.

Roy and Dolores Kelley Photographs

Posted by

Roy Kelley, Retired, Former Associate Broker, RE/MAX Realty Group

Gaithersburg, Maryland  

Comments (23)

Roy Kelley
Retired - Gaithersburg, MD

Thanks so much for your comments.  Have a great day and a very special weekend.


Dahlia, Brookside Gardens, Dahlia Show IMG_7193

Photograph by Roy Kelley using a Canon PowerShot G11 camera.

Roy and Dolores Kelley Photographs

Feb 22, 2013 03:13 AM
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

Roy,

This is excellent information and many people are not aware of it.  Wishing you and Dolores a lovely weekend. A

Feb 22, 2013 04:18 AM
Robert Bob Gilbert
Berkshire Hathaway HomeServices Anderson Properties - Katy, TX
Your Katy TX ( West of Houston) Real Estate Expert

Roy,

I agree about gifts in lieu of being a co-borrower. Thanks for the information and telling everyone about the gift dollar amount that is non-taxable for 2013.

Feb 22, 2013 04:21 AM
Anita Clark
Coldwell Banker Access Realty ~ 478.960.8055 - Warner Robins, GA
Realtor - Homes for Sale in Warner Robins GA

Roy: This is excellent information that all consumers need to be made aware of.  You are right...anyone thinking of doing this needs to consult with a professional first.

Feb 22, 2013 04:22 AM
Beth and Richard Witt
New York, NY
The best Retired Brokers !!!!

Excellent advice Roy.... I sure I'll be hearing from my kids before the day is over.... LOL

Happy Day Roy

Beth

Feb 22, 2013 05:32 AM
Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

This is exactly what I am doing with my own daughter, Roy. She is looking to purchase as I write this.

Feb 22, 2013 06:45 AM
Deborah Byron Leffler BzyBee Real Estate Lady!
Keller Williams Realty Boise - Nampa, ID

Great information that I was just talking to another agent about....we weren't sure what the max was...you must have been reading my mind!  

 

Feb 22, 2013 06:53 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Roy, So many people don't know about this provision and it can help some houses sold for us Realtors. Very good information.

Feb 22, 2013 07:26 AM
Yolanda Cordova-Gilbert
Richmond, TX

Roy,

 Great advice! The gift tax keeps going up and up yeah!

Feb 22, 2013 07:54 AM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

More families are involved with other family members these days when it comes to gifts, especially when used as down payments on homes.

Feb 22, 2013 08:59 PM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Thanks for the post. I will share it with others.

Feb 22, 2013 09:15 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

I am puzzled by the fact that so few families look into this as an estate planning tool. 

Feb 23, 2013 10:38 AM
Rose King
David Tracy Real Estate - Friendswood, TX
Friendswood / Pearland / Houston Bay Area

Great advice, Roy! Now that I am a grandmother, I will be thinking of ways to gift money to my grandson for his college fund. Thanks for sharing!

Feb 23, 2013 01:50 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

Roy this is excellent advise to give to client. It is certainly a better way to assist our children buy their first home..

Feb 23, 2013 03:08 PM
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Roy,

This is such good advice. Many seniors like to have control - I know I do! And what better way to make sure you have some control over your estate than to do it this way.

BRAVO!!!

Suggested!!!

Feb 23, 2013 05:59 PM
Roy Kelley
Retired - Gaithersburg, MD

Thank you very much for your feedback.  Many families should take advantage of the annual gift tax exclusions.

Enjoy the day and have a most productive week.


Dahlia, Brookside Gardens, Imagination IMG_7424 A

Photograph by Roy Kelley using a Canon PowerShot G11 camera.

Roy and Dolores Kelley Photographs

Feb 23, 2013 08:27 PM
Sharon & Bruce Walter
Keller Williams Realty Lafayette, IN - Lafayette, IN
West Lafayette homes for sale
Roy, thanks for this information about the gifting max being raised up to $14,000 per family member.
Feb 26, 2013 09:47 PM
Judith Parker
ProStead Realty - Charlotte, NC
CRS, GRI, CMRS, Charlotte, NC

Good evening Roy, estate planning is so important.  It is great to gift and know the limits.  Have a nice evening!

Mar 12, 2013 09:18 AM
Rob Thomas
Prestige Homes of The Tri Cities, Inc. CALL....423-341-6954 - Bristol, TN
Bristol TN-VA & Tri Cities Agent, ABR, GRI, e-Pro
Roy ....great info for us all ....we need all the help we can get! Thanks! Have a great night in MD!
Mar 12, 2013 09:18 AM
Roy Kelley
Retired - Gaithersburg, MD

Your comments are very much appreciated.

Have an outstanding week!

Mar 12, 2013 09:21 AM