QUESTION
Can the family gift my daughter the equity in the house to cover her down payment and closing cost?
Asked on Apr 09th, 2014 on Estate Planning - Louisiana
More details to this question:
My father passed. The house will be split 4 ways among all four children. The house is free and clear of any bills. My sister is the executor. My daughter is buying the house from the estate. Can the family gift her the equity in the house to cover her down payment and closing cost? She is financing FHA loan. If not could I, her dad, gift her my part of the equity? I have read some about a certificate of transfer but not sure what this means. The amount she needs is about $5000. She is buying the house for $60,000. Pleased let me know what our options are here. Thanks.
11 ANSWERS
Taxation Law Attorney serving Glendale, CA
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Irsfeld, Irsfeld & Younger LLP
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Yes. The 4 children can give their interests to her. You can give your interest to her. No gift tax return will be required by anybody who does not give other gifts to her as well..
Answered on Apr 11th, 2014 at 5:54 PM
Business Law Attorney serving Bingham Farms, MI
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James T. Weiner, P.C.
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Short answer.. YES they can gift her the amount.. it will be best if you contact an attorney to get it done right.
Answered on Apr 11th, 2014 at 5:54 PM
Trusts Attorney serving Sacramento, CA
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Law Office of Victor Waid
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You need to talk to your lender as to whether you can gift your portion to your daughter. Of course you appear to come within the gift tax exemption; check with your accountant also as to how much you may claim for a gift tax exemption.
Answered on Apr 11th, 2014 at 11:48 AM
Business Planning Attorney serving Livonia, MI
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Frederick & Frederick Attorneys at Law
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Yes, you can gift her the funds. There is not a problem with this and it is done quite commonly. Because the amount of the gift is less than $14k, you do not even need to report it to the IRS.
Answered on Apr 11th, 2014 at 11:05 AM
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If the family agrees, and the agreement is in writing, and the probate is done properly, yes, they can gift their shares to her, and she can finance. I would have to review all the documents to be sure.
Answered on Apr 11th, 2014 at 10:41 AM
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Anyone can gift her the down payment, but the lender is likely going to require cash, not a "document". If you are trying to do a "paper gift", you may have difficulty.
Answered on Apr 11th, 2014 at 10:39 AM
Elder Law Attorney serving Hollister, CA
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Charles R. Perry
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There is certainly no legal barrier prohibiting a gift from father to daughter in order to cover the down payment and the closing costs. Banks often require written statements as to gifts, however, so they know the source of the funds. There may be tax issues involved with the gift. You can gift your children well over $5K a year without risk of gift tax consequences. I do not want to speculate about other possible consequences here. It may make sense to meet with a lawyer for an hour or so, to explore the possibilities here. It just makes little sense to speculate.
Answered on Apr 11th, 2014 at 10:00 AM
Commercial Attorney serving Chicago, IL
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Ashcraft & Ashcraft, Ltd.
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Yes the estate can grant the buyer a credit against the purchase price or an heir can grant that credit through the estate. The issue is with the lender. The lender may want this gift/credit structured a certain way. Lender's prefer to reduce the purchase price rather than allow credits against the purchase price. A reduction in the purchase price does not help since that will merely reduce the amount of the obtainable loan. Credits against closing costs sometimes cover this problem. As a last resort the estate could sell the house and take back a mortgage. Your daughter would then refinance and pay back the mortgage to the estate. Refinances have different loan underwriting from mortgages and a sufficient appraisal will be necessary. This sort of linked transaction may be a problem for some lenders. This is a risk laden alternative.
Answered on Apr 11th, 2014 at 9:57 AM
Yes, the family can do that if they all agree. However, there will probably be tax consequences for both the donors and the recipient. And you and your husband can gift your share to her, with the same consequences.
Answered on Apr 11th, 2014 at 9:53 AM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Certainly, either you or the family members can make any gift they want. As a practical matter, the easiest way is to give her cash and get the cash back from the mortgage.
Answered on Apr 11th, 2014 at 9:50 AM
Probate Attorney serving New Orleans, LA
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James G. Maguire
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Talk to the attorney who is handling the estate and let him/her know what your family wants to do. I don't see any problems in carrying out the plan set forth in your question, as long as everyone agrees.
Answered on Apr 11th, 2014 at 9:35 AM