Tips for Parents Buying Homes for Children

With home prices low, now could be a good time for parents to give their children a home or even an investment property.
REALTOR®Magazine
Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.

· Give a cash gift. Individuals are allowed to gift up to $13,000 per person in a
  given year without incurring gift tax. That means a couple could give their
  offspring and spouse $52,000 in a single year to go toward a down payment.

· Lend money. The government requires that family members meet or exceed minimum
  loan rates to avoid having the loan be considered a gift. The rates are currently
  low. One way to handle this is for parent to use the $52,000 gift exclusion to
  forgive both interest and principal.

· Use a trust. Set up a qualified personal residence trust, or QPRT. You’ll need an
  attorney to handle this transaction, but in a nutshell, parents put the home they
  want to give their children into a trust. At the end of a pre-set term, the home
  passes to the children with no taxes due.