They couldn't have purchased his split-level home in October without a little help from an increasingly popular financial institution: The Bank of Mom and Dad.
More than a fifth of parents have co-signed a home loan for an adult child or given a gift or loan to help them buy, according to a September survey by Better Homes & Gardens Real Estate and Research Solutions Inc. More than half of those earning at least $75,000 said they wanted to help their children finance a home purchase.
Parents need to be mindful of IRS "gift tax" rules on gifts of more than $13,000 , and lenders may require signed documents from the parents guaranteeing that the money is a gift, not a loan. Under IRS rules, each parent may gift up to $13,000 per year to a child, for a total of $26,000. Each parent may also gift the spouse $13,000 apiece.
From a financial perspective, parents may see more benefits from gifting than loaning money. On the gift front, since it's unclear whether the floor for which estate taxes apply may drop from $10 million now to $1 million in 2013 - Congressional decisions are still forthcoming - some parents may want to gift their children money now to reduce future estate taxes.
Sources:
Reuters
More than a fifth of parents have co-signed a home loan for an adult child or given a gift or loan to help them buy, according to a September survey by Better Homes & Gardens Real Estate and Research Solutions Inc. More than half of those earning at least $75,000 said they wanted to help their children finance a home purchase.
Parents need to be mindful of IRS "gift tax" rules on gifts of more than $13,000 , and lenders may require signed documents from the parents guaranteeing that the money is a gift, not a loan. Under IRS rules, each parent may gift up to $13,000 per year to a child, for a total of $26,000. Each parent may also gift the spouse $13,000 apiece.
From a financial perspective, parents may see more benefits from gifting than loaning money. On the gift front, since it's unclear whether the floor for which estate taxes apply may drop from $10 million now to $1 million in 2013 - Congressional decisions are still forthcoming - some parents may want to gift their children money now to reduce future estate taxes.
Sources:
Reuters
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