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Gift vs Joint Ownership?

Posted: Wed Oct 30, 2019 3:50 pm
by K72
My wife and I are helping our unmarried child with a first home purchase by contributing the down payment. Seems to me we have two choices:

1. Gift the $ and register the gift with IRS so it will be counted against our estate tax exemption. Question: do I have to file the gift form with IRS only once, or every year thereafter?

2. Jointly own the property (with perhaps a side legal agreement detailing the ownership split) with the idea of passing our interest as an inheritance with stepped up basis.

In either case it isn't necessary for us to be co-mortgagees.

I like the idea of (2) because we retain some degree of control of the asset and hopefully protect it from potential bad news later (e.g. ex-spouse) and the stepped up cost basis. I fully understand that should the value appreciate the bite out of the estate tax exemption would be bigger but I'm still thinking it's a better way to go.

Any thoughts on why (1) might be the better plan?

Re: Gift vs Joint Ownership?

Posted: Wed Oct 30, 2019 3:53 pm
by mhalley
How about a third option, gift the 30k this year, and make a loan for the rest, then forgive 30k each year till payed off? Might make the mortgage a little more difficult tho.

Re: Gift vs Joint Ownership?

Posted: Wed Oct 30, 2019 3:54 pm
by RickBoglehead
Because with #2 you:

- open yourself up to liability
- exert an undo influence on your child, and any future partner. "Retain control"? :shock:

Gifts are one-time and one form.

Re: Gift vs Joint Ownership?

Posted: Wed Oct 30, 2019 4:40 pm
by Ybsybs
Ideally you've raised a person ready to be an independent adult and who has the skills to choose a life partner appropriately.

If you don't and you know it, something more elaborate than shared ownership of the house might be best. For instances if you think your child might be sued and lose the house, having half of it belong you to isn't the best option.

Re: Gift vs Joint Ownership?

Posted: Wed Oct 30, 2019 5:26 pm
by K72
Thanks for the comments!

Re: Gift vs Joint Ownership?

Posted: Wed Oct 30, 2019 5:26 pm
by delamer
Give her the downpayment and move on.

Maintaining control of an adult child’s financial life — absent a mental or physical disability — is unfair to both parties.