QUESTION
Can family gift us money after we get a loan to buy a house from them?
Asked on Apr 24th, 2014 on Estate Planning - Washington
More details to this question:
We are in the process of getting an FHA loan to purchase a house owned outright by my uncle, aunt, and father that they inherited when my grandfather passed away. We want to get the loan for 99,000. Then after closing, we want the family to gift us 10,000 so we can make renovations to the house. But my uncle is concerned that this is illegal, and wants to just sell us the house for 89,000 (which would give us a slightly lower payment, but would not help us make the renovations). The 10,000 gift won't have anything to do with the closing agreement, and it is just trust on my part that they will each give us $3,333 after closing and receiving their monies. Am I correct in thinking that what my family does with their money after closing is their business and they are free to gift money to whom ever they wish?
11 ANSWERS
Business Planning Attorney serving Livonia, MI
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Frederick & Frederick Attorneys at Law
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Yes, this can be done, provided the house appraises for the higher value and you can come up with the necessary down-payment.
Answered on Apr 28th, 2014 at 8:33 PM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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If the house is worth $89,000 and they are setting the price artificially high to give you cash, your uncle is right - that's illegal.
Answered on Apr 28th, 2014 at 8:33 PM
2 Awards
Yes, they are free to gift you the money if they chose to do so. If the house appraises, they can sell you the house for $89,000, and you may be able to get a loan for $99,000 and get cash back from the loan. Speak with your loan agent to find out if this is a possibility should your family not want to follow through.
Answered on Apr 28th, 2014 at 8:33 PM
Probate Attorney serving New Orleans, LA
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James G. Maguire
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You are correct. Nothing illegal about it. Your relatives are free to make whatever gifts they want. No tax consequences.
Answered on Apr 28th, 2014 at 8:33 PM
Commercial Contracts Attorney serving Boise, ID
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Peters Law, PLLC
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Yes, I think you are right; however, you are being awfully greedy. They are selling you a house, probably below cost and now you want them to give you money. That takes a lot of chutzpah.
Answered on Apr 28th, 2014 at 8:33 PM
I don't know why your uncle thinks that gifting you the money would be illegal but he's clearly uncomfortable with the idea. Look for other ways to make this work for all of you. If you haven't already committed to the FHA loan, see if you can get an extra $10,000. Then buy the house for $89,000 and use the extra money for renovations. If that isn't possible, try to buy the house for $89,000, and borrow the $10,000 from your father, aunt, and uncle to make the renovations. Or, if the house is in an area that the community wants to revitalize, see if you can get a low-interest loan from some community agency or city department.
Answered on Apr 28th, 2014 at 8:33 PM
Thomas Edward Gates
One may gift $14,000 to a single individual each year without tax considerations. Hence, for a husband and wife, $28,000 can be gifted each year. They must file the appropriate form with their income tax return.
Answered on Apr 28th, 2014 at 8:32 PM
Edwin K. Niles
You are correct.
Answered on Apr 28th, 2014 at 8:32 PM
Commercial Attorney serving Chicago, IL
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Ashcraft & Ashcraft, Ltd.
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There is no problem with accepting a gift. The problem surfaces if the there is an expectation that the funds will be repaid. There can be no secret debt arrangement. Such a promise or arrangement must be disclosed to the lender and would probably jeopardize the loan. There can be no second mortgage promised now and delivered later. The other factor is the possible characterization of the gifts as a de facto reduction in the purchase price. The promise of the gifts must not be connected to the sale and should not occur, if at all, near to the closing date. Each gift should be independent of the others, come directly from the an account of the donor and the gifts should not occur at the same time.. It would also be best if the ratio of the gifts is different than the ownership interests of the Sellers. If your father, aunt and uncle are equal owners, perhaps your father gives more than your aunt and uncle. You might also consider that a gift being made by the direct purchase of material or labor.
Answered on Apr 28th, 2014 at 8:32 PM
Trusts Attorney serving Sacramento, CA
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Law Office of Victor Waid
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You are correct in your thinking, as the lender would not care if a gift is made to you and what you did with money.
Answered on Apr 28th, 2014 at 8:32 PM
3 Awards
A gift is a gift, there is nothing illegal about being given a gift.
Answered on Apr 28th, 2014 at 8:32 PM