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In our latest insight article, we share information on gifting money to your children to help them purchase a home.
Top 5 Things to Consider if You’re Thinking of Gifting Money to Your Children to Buy a Home
Parents gifted $10Billion to adult children in 2021 to buy homes.
In addition, CIBC reported the following:
- Almost 30% of first-time home buyers received assistance from family members
- The average gift is now approximately $82,00
- Where the gift is the primary source of the down-payment, the gifts average $104,000 for first-time home buyers no less than $157,000 for mover uppers
- Only 5.5% of the gifting parents used debt to finance the gifts (that percentage rises substantially for gifts for homes in Vancouver and Toronto) and therefore it appears parents are using their savings to make these gifts.
Whether parents are extremely generous or just desperate, being tired of their kids living in the basement, raiding the fridge and drinking the liquor cabinet dry, there are a number of things to consider:
- Does the beneficiary of the money have a spouse?
- Should the money be in the form of a gift, a loan or part of a family trust?
- What will the money mean to the child?
- What baggage might come with the gift or loan?
- Whether there are tax consequences?
Whether the child has a spouse is important.
Are you intending to just benefit your child or them and their spouse? Gifts given to a child can easily become the fodder for family law lawyers if the parties separate. However, there are of course ways to prevent this.
Loans are one way to secure the gift from a spouse trying to include it in the division of family property upon separation. Loans are indicative of an intention to pay the money back to the parent. Comparatively, gifts do not entail any intention that they are be repaid. However, this area can get complicated too, especially if the loan is treated as a “forgivable” loan which begs the question of whether it was really a loan or was it rather, a gift.
Only you the parent really know your child. Money affects everyone differently. It’s been said it will make them more of what they naturally are. That is, some become more responsible while others will lean toward the easy-come, easy-go, path.
The flip side of this is that sometimes people who receive gives are either really grateful but other times they end up feeling guilty or resentful and the gift or loan causes much undue resentment which sours the relationship.
Lastly, where the money comes from can incur unwanted tax consequences. No one wants that, except maybe the government.
” The bottom line is that careful consideration and reflection is needed before just writing the cheque or passing along equity in property to your child. To ensure what you want to have happen, happen, consult your accountant and lawyer for some professional advice as informed decisions tend to enable better choices.”- Robert Mackay
As always, your first consultation with us is free, so don’t hesitate to reach out so we can meet you and determine what you need and how we can work together for you.