Continuing on the trend we’ve recently highlighted, our friends at The Playbook by Morning Brew published a Judy Dutton article “We bought homes for both our kids”. It echos many of the themes we’ve been pressing, including:
- Communication - This is a business transaction that should be negotiated and agreed to
- Reasonable Help - Mom and Dad are assisting as able, not with a blank check
- Documentation - Families are leveraging clean, simple agreements to ensure family accountability, consistency, and harmony
How is this sentiment showing up in reality? “Nearly 6 in 10 parents have contributed to this purchase or plan to do so. Many view it as an advance on their kids’ inheritance when it can truly make a difference, and the numbers back this up: One study found that owning a home by age 30, rather than 40, leads to a 22.5% higher net worth by 50.”
Practically, how does this family conversation need to happen? Let’s lean on CPA Kurt Supe who consistently gives sound guidance about inheritance including how to give money to adult kids without ruining the relationship:
“Decide the number before they ask. Make it a gift, not a loan. Document the gift for estate purposes. The IRS doesn't care about feelings. Your other kids will. Paperwork prevents arguments after you're gone.”
The gift versus loan portion aside (there are very few hard and fast rules, most advice is a guideline), this is a reasonable and sound direction. Have a plan, document it, and let the plan be known. This is at the essence of how proper planning, paperwork, and process can alleviate the family drama and giving family money to the probate courts and the taxman.
We can have these conversations with Mom and Dan and with the Next Generation. We can be the adults who document and share these material decisions in the estate. We can ensure that we are not letting the government steal our family wealth. We can move our families forward…