QUESTION
Can we gift equity to my daughter if she is buying my father’s house from the estate?
Asked on Apr 24th, 2014 on Estate Planning - Illinois
More details to this question:
My dad left his house free and clear to be divided among his four children. The house is in probate and my sister is the executor. My daughter is buying the house from the estate. The house was appraised by the bank for $68,000 and we are selling it to her for $60,000. Can we, the beneficiaries, gift her the equity to cover down payment and closing cost? She is approved for a Federal Housing Administration loan. All four of the beneficiaries of the estate agree to gift the equity if it is possible. Thank you.
11 ANSWERS
Corporate/Business Attorney serving Beachwood, OH
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Christine Sabio Socrates Attorney at Law
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Yes, if all beneficiaries are in agreement, this can be done with approval by the court.
Answered on May 14th, 2014 at 11:55 AM
Edwin K. Niles
Why not?
Answered on Apr 25th, 2014 at 2:21 PM
Business Law Attorney serving Bingham Farms, MI
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James T. Weiner, P.C.
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Yes you may gift her enough equity to cover the down payment and closing costs. equally if all beneficiaries agree.
Answered on Apr 25th, 2014 at 1:00 PM
Business Planning Attorney serving Livonia, MI
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Frederick & Frederick Attorneys at Law
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Yes, this can certainly be done.
Answered on Apr 25th, 2014 at 12:52 PM
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Yes they can, but it needs to be in writing and run through the probate with a proper Notice of Proposed Action so it does not come back on anyone.
Answered on Apr 25th, 2014 at 11:34 AM
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That will probably not fly with the lender. They will then treat the purchase price at $60,000. It sounds like you want to treat it as $68,000 with her "owning" $8,000 equity.
Answered on Apr 25th, 2014 at 11:25 AM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Generally, the FHA will treat the sales price as the value of the house. They aren't impressed with the argument that "the house is really worth $68k but we are gifting her $8k by selling it for $60k". They allowed a ton of that and it was one of the major causes of the financial crisis.
Answered on Apr 25th, 2014 at 11:03 AM
Commercial Contracts Attorney serving Boise, ID
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Peters Law, PLLC
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You need to talk with the lender to see if it is allowed. Your daughter's mortgage broker should have the answer.
Answered on Apr 25th, 2014 at 10:31 AM
Taxation Law Attorney serving Glendale, CA
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Irsfeld, Irsfeld & Younger LLP
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Yes, but be sure to file your gift tax returns.
Answered on Apr 25th, 2014 at 10:31 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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See an attorney, certainly that should be possible legally, the question is going to be whether or not it is satisfactory to the lender.
Answered on Apr 25th, 2014 at 10:16 AM
Commercial Attorney serving Chicago, IL
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Ashcraft & Ashcraft, Ltd.
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It is possible to gift the equity but the gift has to be disclosed to the lender and has to done in a manner that is acceptable to the lender. If the estate has sufficient cash it should make a cash gift to the daughter and the daughter would deposit the check and write an earnest money deposit check in the same amount to the estate as a credit against the purchase price. The four heirs should consent to the gift in writing and acknowledge the gift as a partial distribution of the estate that they want delivered to your daughter on their behalf. The lender will probably require each heir to execute a gift letter. The mechanism of this gift should be reviewed by the loan officer your daughter is using to make sure the underwriter will not consider this gift to be a reduction in the purchase price. It may be that the gifts will have to be made as a partial distribution to the heirs and then the heirs independently make the gifts to your daughter. It may be that the gifts should be disproportionate, in other words your gift might be greater so that the relative shares of the gift is not the same as the shares due the heirs in the estate.
Answered on Apr 25th, 2014 at 10:06 AM