Personally, I think that would be a disservice to the kids. They came this far, going to college and starting a career. It would be good for them to do some sacrificing and saving so they can have that suburban house with a playground. In the process, they learn money management, responsible debt, and living within their means.
For us, we could afford a house twice the size as we have now, but we don’t care to live that way. That extra money goes to paying off the house faster and having a secure retirement. I conclude that the folks in the fancy house driving the flashy cars are the ones with the most debt.
Wow. That’s a heck of an assumption. It is of course possible be both financially responsible and have such outward measures of wealth. Book, cover, all that.
My partner and I worked hard to build up our net worth from less than 0, and much of that experience was painful rather than character-building. We expect our daughter to also work hard and be financially responsible, but don’t consider that expectation inconsistent with also paying for her college, and helping her with car and house.
Believe me, even if you help them buy the house (or fix one up) there are PLENTY of opportunities for them to learn money management, responsible debt, etc. and they likely will be sacrificing and saving for additional things that they want/need for the house. Lots of scenarios come up. For my D & Son-in-law, they needed to repair a fence on the property so their dog wouldn’t escape, which turned into a replacement of all the fencing, they needed to have a large, dead tree removed from the front yard before a storm knocked it down on the house, they needed to furnish the house, etc.
I wouldn’t just buy a house for any kid - they would need to have a job that covers mortgage & expenses, and I would have to be confident that they were responsible and realized the serious nature of the gesture.
We’re open to helping/gifting house, but right now that topic has not been brought up.
We are, however, in the camp of helping out while we are alive rather than after we’re gone. One thing that we have been doing is gifting stock. This is especially good now as the market is down ( more shares at lower price) and the gifted stocks basis assumes the value of the transfer date (lower basis). Picking stocks to gift this year right now. Lots of options.
D bought a townhouse 2 years ago. We did help with the downpayment. We did have to provide the bank with a letter indicating that this was a gift. She owns the townhouse outright, our name is not on any of the house docs. She qualified for the mortgage on her own. Our downpayment helped cut down the mortgage amount and payment for her.
We had the money and it helped her - so no overthinking this on our part.
If you give the down payment as a gift, it goes against one’s lifetime gift exemption, right? I guess that’s okay since it’s basically gifting a portion of one’s estate early to their kids?
We are open to helping our daughters with buying a home at some point. Since we all live in Southern California you are talking about $160K for 20% down on an $800K starter home. As others have said we prefer to give things now versus waiting until they inherit from us. D1 and her fiance have talked about moving somewhere else in the west where housing is not as expensive.
We could buy our kids houses. We won’t (but sticking to the OP’s request). If we did plan to buy our kids houses, I’d consult an attorney. Gifting the $ would/could be an issue. I’d worry less about divorce than tax impiications (for us and them) and estate. I hate to give Uncle Same any more than needed so I often talk to our attorney and then CPA when doing big things. I’m also really into fairness so would have to do same-same for the kids.
We’re likely to retire early (late 50’s), our kids know that we are set but have no idea about how much we actually have. We live frugally and have raised the kids as such. Though we’ve spent lots on education and kids will graduate college debt free. I’m leaning to paying for grad school as well but my spouse wants out after college.
If my kids needed help I’d set it up so that it made financial sense with an eye to what is needed and how to best frame it to work. I’d make sure one child isn’t impacted by the investment in another. Baseline for us would be that everyone in the picture would have to be working to their capacity.
Starter homes by us are about 600K and still rising. I have no idea where the kids will end up but it’s likely that costs will be extremely expensive. We have a large plot of land though enough to build a couple of houses Our kids seem to be pragmatic about work and plan to have well paying jobs. One never knows though.
We’ll likely have a second home in a Summer spot when we retire so that’s another way to do things. Could gift income stream from a rental to a kid who needs it for their mortgage. So, I’d buy the house/condo and just gift them the income as it comes in.
If you were going to gift in any event, you could sell the stock you were planning to gift and take the capital gain/loss (if you could use the losses, then sell stocks that are in a loss position) and gift the proceeds to your kids. Any shares they buy would be at their purchase price basis. So you basically get to the same place with the added benefit of realizing some tax losses for 2022.
Spot on response, @inforapound. Both of our s’s are very financially responsible. Fortunately they learned that well. Older s and w chose to buy a house just before they married 7 years ago. They are selling it for a nice profit, but moved to have more space, closer to DIL’s family and better schools (had a funny typo earlier— I typed for more money — well that was true it was more money!) Anyway, the market where they live is ridiculously expensive but they now have their forever home. Younger s, wife and GS still live in a rented condo. That’s their choice. They share 1 car, an aging honda with the side mirrors taped on with duct tape. Clearly older s’s cash flow is tighter at the moment, but both are fortunate to have the means to take care of their families. We have no debt (no mortgage, no loans, etc) and are more than happy to help our kids if we can. Why not enjoy seeing them enjoy? They are not flashy. There was a lot, a LOT of short and long term financial thinking/planning that went into older s and his family’s decision to move when they did. Please check your judgment @coolguy40
My son is still in college but as a middle level education major, we know he will need help! And we are happy to do it. Likely in the form of a full down payment for a small condo, and he has to be able to afford the mortgage payments etc. Can’t see renting long term as a smart plan.
This is judgement too. That gifting when alive is preferred to gifting upon death. Just want to highlight as you called out Coolguy. I’m glad OP said no judgement and think it makes the conversation stronger. But you do need to check regardless of where you stand. (BTW, I have an opinion regarding why I won’t gift but withheld per OP request).
I don’t know that you’re withholding as well as you think you are.
In any case, it’s one thing opine that it’s better to gift when alive (and that’s a strong interpretation of the post) and another to assert that those with trappings of wealth carry the most debt.* The former is an opinion, the latter a falsehood.
This. Rents in high COL areas are so outrageously burdensome. Obviously so are home prices, but there’s autonomy to be enjoyed and equity to be built in one’s own home.
Our kids seem to be pragmatic about work and plan to have well paying jobs. One never knows though.