Doron F. Eghbali Real Estate Law Blog on Lawyers.com

Genorous Holiday Gifts for Your Children's Future

Sunday, December 6, 2009 by Doron F. Eghbali

If you can afford it, you could help out your children with their mortgages or down payment on a home with generous gift taxes.

You and your spouse are allowed to each make $13,000 gifts of property or money, in 2009, to as many people as you want. However, any gifts in excess of $13,000 given to each person is counted against your lifetime gift-tax exclusion of $1,000,000 and $2,000,000 for married couples.

In other words, you and your spouse could each contribute $13,000 to each one of your children in total of $26,000, in 2009. So, if you want to give your child $52,000 as a down payment on a home or their second mortgage, you could contribute $26,000 this year and another $26,000 the next year.

This is especially important if your child could take advantage of the federal government's tax-stimulus due to expire early next summer and the $26,000 can account for at least 20% of home sales price to avoid paying private mortgage insurance.

However, if you want to gift out your depressed rental property to your child, it could be better to sell it, take the losses and then gift out the proceeds. This is because neither the donor, you making the gift, nor your child could take losses on the decrease in home value that happened before the date of the gift.

In addition, if you want to gift out a property whose mortgage exceeds its value, most lenders are reluctant to transfer ownership unless you remain on the mortgage and your child's financial condition is at least as good as yours or even better.

Posted at 12:19 PM
Topic: Real Estate
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