What Can Go Wrong If You Gift a Real Estate Property to a Family Member?

Now that the new year has been going on long enough that people have started breaking their New Year’s resolutions, everyone is talking about the annual gift tax exclusion.  In 2025, the annual gift tax exclusion is $19,000.  This means that you can give a whopping $19,000 per recipient to as many recipients as you choose or as you can afford, without paying gift tax, and then you can do it all again next year.  Of course, as a parent of young adults, you know that $19,000 is chump change.  Most people under 40 who have never owned a house will never be able to do so unless their parents give them money for a down payment.  Your measly gift of $19,000 would not even make a dent in a down payment on a condo in New York City.  You would have to give your son or daughter the annual gift tax exclusion amount year after year until he or she was pushing 40, and given today’s economy, your child would have to spend some of the money anyway, just to make ends meet.  The surest and least expensive way to make your children homeowners is to give them real estate properties that you already own.  Depending on which numbers you are focusing on, this could be an unwise financial choice, though.  To weigh the costs and benefits of giving your son or daughter a real estate property as a gift, contact a Bronx real estate attorney.

Is It Worth Losing Money to Create Generational Wealth?

Market Watch columnist Quentin Fottrell recently answered a question from parents who own a rental property outright in addition to the house that is their primary residence.  Their oldest son, who is newly married, wants to buy it from them for $200,000, when it is worth about $375,000.  Fottrell advised them that their son would benefit from this generous gift, but that the parents should think carefully before deciding that they can afford to give it.

The most valuable thing the parents would be losing would be the $175,000 in equity if they sell the house to their son for such a low price.  Fottrell raised the important question of how the parents would be able to be equally generous toward their other two children.  Would they be able to give each of them a house as a gift?  If not, would they be able to give each one $175,000 as a down payment for a home purchase?  If that is their plan, but they do not own any other rental properties, then perhaps the best solution is to give each of their youngest two children the full annual gift tax exclusion amount each year and then top it off to add up to $175,000 when the children are ready to buy a house.

Schedule a Confidential Consultation With a Bronx Real Estate Attorney

A real estate lawyer can help you use your strong financial position as a homeowner to help your children gain a foothold in making their first real estate purchase.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.

Source:

msn.com/en-us/money/realestate/i-ll-be-the-bad-guy-if-i-reject-their-offer-my-son-and-his-wife-want-to-buy-our-rental-for-half-the-market-value-is-that-fair-to-our-other-children/ar-AA1wU2dr?ocid=msedgntp&pc=ACTS&cvid=34d115ce7cf4450dac34d95bf3853372&ei=41