February 17, 2017
Given the uncertain job market and economic climate, it can be difficult for young people to begin building a life and home of their own.
In such a climate, many well-off parents are considering buying a home for their adult children, both to help their children and as an investment.
“Having a parent purchase a home for their kids can help accomplish a number of things,” says Nancy Hermann, Regional Trust Manager for
U.S. Bank Wealth Management. “It can help with the chemistry of the family, and it can be a portfolio diversifier for the parents.”
For most high and ultra high net worth families, the cost of a house isn’t an issue — rather, it’s how such a move meshes with the values that parents and grandparents want to communicate to younger generations. Would a home allow a young adult to make his or her way in the world, or send a message that the child doesn’t have to be self-sufficient?
“Taking that idea of purchasing a home a step further and having the young adult pay rent or utilities could also help teach them about responsibilities and accountability,” Hermann notes.
Some families may make an outright gift for part or all of the property cost. One potential benefit of essentially making an advance on an inheritance is the ability to take advantage of the current federal tax exclusion on gifts and estates. Until 2018, each parent may give up to $5,490,000 free of federal gift tax.