A Guide To Helping Your Kids Own A Home

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You'll find creative Kenzie making crafts or bak

You’ll find creative Kenzie making crafts or baking yummy recipes! She also adores dogs and does great in school. View profile



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These sweet siblings are Ryleigh and Aiden! They have a wonderful bond and bring laughter, love, and joy to everyone around them. View profile

Learn Their Why

Find out why your child wants a smartphone. “This opens up a conversation so they can tell you if having a phone is a status thing,” says Sierra Filucci, executive editor of parenting content and distribution at Common Sense Media, a nonprofit that specializes in evaluating the age-appropriateness of games, movies, books, and more. “Do they want one because of a certain app their friends are using? If so, look into that app and see what you think—you don’t want to get them a phone then tell them they can’t use it for one reason they wanted it.”

And when your kid is begging for phone, and telling you every other kid in their class has one? "Don't believe them," says Filucci. "Unless they're 16, they're likely just saying that as a technique."

That's not to say you should discount the role phones play in tween social life. "It can be very important for keeping in touch outside of school," says Filucci. "Phones are such ubiquitous tools, kids without them can feel cut off, socially, from their peers."

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The High Costs of Second Homes

Houses purchased by parents as second homes or as investments often require bigger down payments, since they don’t qualify for the generous mortgages geared toward first-timers, such as Federal Housing Administration (FHA)–backed loans.

“The difference between a primary [home] mortgage and an investment-home mortgage is significant,” notes Linda Robinson, a Realtor and loan officer with Cabrillo Mortgage in San Diego. “You have to put down at least 20% to 30% on investment property, and the [interest] rates are a little higher, too. If the kids are creditworthy at all, the parents may be better off being co-signers and gift-givers than being the ones on the loan.”

Tax Implications of Cash Gifts

For tax reasons, parents often opt to give offspring the money they need as a gift rather than pay the costs directly. The 2021 annual gift tax exclusion is $15,000 per donor for each recipient (rising to $16,000 in 2022). If you stay under the annual exclusion, then there is no need to file a gift tax return.

For example, you and your spouse could give your child and your child’s spouse a total of $60,000 ($15,000 × 2 parents × 2 recipients). That’s a decent down payment in many American cities. You can follow the first gift with another $60,000 ($15,000 × 2 gifting parents × 2 recipients) gift on Jan. 1 of the next year, assuming the Internal Revenue Service (IRS) doesn’t change the annual exclusion amount. The $120,000 total will not count as income or be subject to federal income tax on your child’s tax return.

However, if any one gift is given that exceeds the $15,000 annual tax exclusion amount, then the gift giver will need to file IRS Form 709. This form is used to report and track total gifts given, which exceeded the annual limits in any one year, during the taxpayer’s lifetime. It reduces the taxpayer’s lifetime estate tax exclusion. The purpose is to discourage taxpayers from giving away all of their money during their lifetime in an attempt to escape the estate tax after death. 

The gift, even when reported on Form 709, is not taxable in the current year if it does not exceed the taxpayer’s remaining lifetime gift limit. As of 2021, the estate tax exclusion is $11.7 million (rising to $12.06 million in 2022). Because the lifetime limit is so high, most taxpayers will not be faced with paying gift tax. Rather, the main concern is whether or not you will need to report your gift on Form 709.

Keep in mind that the money you give as a gift to your child needs to be sourced, tracked, and documented. To safeguard the transaction, use a mortgage professional who has experience with this.

Kid-friendly features

Once you decide on what size home is best, consider child-friendliness.

It can be helpful to make a wish list of features

It can be helpful to make a wish list of features when looking at houses, and here are several that can be helpful to busy households with kids:

  • Storage: Kids have stuff—lots of it. When you’re in the baby stage, look for places to stash large gear such as strollers and car seats. As kids age, a garage might house bicycles and sports equipment. Look for ample closet space for clothing and toys.
  • Stairs: If you have a baby or toddler, make sure stairs can be safely gated. Open staircases may be beautiful, but they won’t be so pleasing when a toddler veers too close to the edge.
  • Bathtubs: Kids love bathtubs. Look for a house that has at least one with enough space that allows you to sit on the edge.
  • Fenced yard: Kids also love to be outside. A house with a fenced-in backyard provides a safe place for them to play.
  • Laundry: Children mean lots of dirty clothes. If your washer and dryer are in the basement, navigating the stairs several times a day might become tiresome. Also, make sure the laundry room isn’t adjacent to your child’s room. While some kids can sleep through anything, others might wake when the dryer buzzer sounds.
  • Hazards: Parents can baby-proof their homes with outlet covers and cabinet stops, but look for bigger features that could present a safety hazard. A home with a swimming pool, for example, may need legally mandated fencing or alarms. Outdated electrical systems could pose a hazard too.
  • Open floor plan: A family-friendly floor plan often means an open floor plan, allowing you to cook dinner while your kids play in the living room. Look for a home with a kitchen that overlooks the family room. Open spaces can provide extra room for family bonding over game night or movies.

Legalities

If you’re not married to your partner and want to purchase the home together, decide how you’ll legally structure ownership. While options vary depending on your state, there are three main methods, according to Nolo.com, a legal resource.

  • Sole ownership: In this arrangement, just one name is recorded on the deed. This is a good option if only one person has good credit. The downside is that the person not on the deed has no legal ownership in case the relationship ends.
  • Joint tenancy arrangement: Similar to the way a married couple purchases a home, this option gives each person half ownership of the property. If the relationship ends, both parties must agree and sign to sell, or one person could buy the other out.
  • Tenants in common: This third option allows for unequal ownership. For example, one person owns 75 percent while the other owns 25 percent. This can be a good choice if the financial contributions, such as a down payment or mortgage payment, are uneven or if one person has a better credit score and might be approved for a larger amount. It assigns equity equal to contributions.

It’s always important to consult a real estate attorney, especially when you’re purchasing a home without being married so that each person is protected and understands their rights.

Considerations For Parents Before Helping Out

You may have heard warnings against going into business with family, but did you know that loaning, co-signing and gifting money can have a lot of the same consequences? If you don’t properly communicate and plan, you could stress your relationships and finances. Below, see some things to consider beforehand.

Examine How This Could Affect Your Relationship

You can’t put a price on a great relationship or family bond, so it’s important to consider how lending or gifting large amounts of money can change things. Children may feel overly indebted to their parents or there could be new stressors added to your relationship. These are all things that you should talk about beforehand. You might consider speaking to a family counselor to ensure you’re on the same page and have the right tools to effectively communicate.

Don’t Give Beyond Your Means

While you probably want to help out your child as much as possible, it’s very important that you don’t give beyond your means. If you don’t plan properly or are overly generous, you could jeopardize your own financial health, like your retirement savings. This could also add a hidden layer of resentment or stress to your relationship with your child. Speak to a financial advisor so you know where you stand and what you can give within your means.

Draft Up A Detailed Agreement

In order for both you and your child to feel comfortable going into one of the agreements below, you should always draft up a legal agreement. This doesn’t mean that you’d have to pursue a lawsuit if your child misses a loan payment, but it just helps lay out the expectations so everyone is on the same page and protected from expectations that fall outside of the agreement.

This may feel strange, especially if you have a tight-knit relationship with your child, but it will actually help de-escalate any disagreements over the terms of your loan or gift.

Make Sure Your Estate Is In Order

There are a lot of complicated moving parts that arise when you loan or gift money to your child. Not only do you want to make sure that everything is in order with a particular agreement, but you also need to know how that fits into your overall financial plan. If you have other children, you should consider how assistance for their sibling could or should affect their inheritance and how they could perceive their sibling’s gift down the line. For example, if you pass away before a loan is paid back to you, what will the implications be? Save yourself the headache and have an expert help you sort this all out.

Don’t Just Think With Your Heart

All of the above points could be boiled down to the advice of not thinking only with your heart. As much as you love your child, you have to think about what’s best for everyone involved and the big picture. Depending on the route you take there can be complicated tax implications and other limitations. If you know you’ll have a hard time separating financial savviness from family, you should consider reaching out to a financial or law professional to help you sort out a plan.

Raise a Digital Citizen

Once we told our son he could get a smartphone, his fixation intensified. One day after school, I found him sitting in a tree listening to music—on my phone. "If I had my own…" he said for the fifteenth time that week. But we weren't about to just hand one over and let him loose. As Uncle Ben in Spider-Man wisely said (admittedly in a different context), "With great power, comes great responsibility."

“Talk about their digital footprint, which starts with iPads and computers but grows even more with smartphones,” says Mariah Bruehl, author of Real-Life Rules: A Young Person’s Guide to Self-Discovery, Big Ideas, and Healthy Habits. “You can do a search on yourself and show what comes up: the people you follow, comments you’ve made on posts or articles. Make sure your child understands that everything you do online—comments, likes, posts—stays with you for years to come.”

Consider drafting a contract to be signed by parent and child that highlights that the phone is a privilege, not a right, and that it can be taken away at any time for any reason. Common elements of that contract include when the phone can be used (before bedtime and not at the dinner table, church, or while doing homework) and how (within the limits of the data plan, with the knowledge that the child will be expected to take financial responsibility for a lost or broken device, and the promise not to download any apps without permission).

The contract can also cover digital etiquette: I will treat others the way I wish to be treated and I will not bully, embarrass, or send inappropriate pictures or messages. While it's impossible to cover every scenario, contracts should be used as a jumping off point for ongoing conversations about unintended consequences, such as the possibility that anything you write in a text can be copied and pasted in a very public way.

Callahan Walsh, a child advocate with the National Center for Missing and Exploited Children, which operates an online, web safety resource called NetSmartz, suggests kids use this guidepost:

"Don't send a text unless you're okay with sharing it with your grandmother."

Things to Avoid When Giving Gifts to Kids

Try to avoid the gender trap

You should never assume that your son needs trains and your daughter wants dolls. Most parents normally prefer purchasing their children gifts that totally not gender specific. At the same time, many kids will always covet toys that are fully associated with a different gender. You should always place your kid’s interest ahead of gender when out there choosing the right gifts for their kids.

Being age appropriate

Normally, most toys are designed at certain age levels, as you can see, this directive looks easy one to follow but it’s not at all. Most parents do believe that their kids are somehow advanced than other kids of their age and they go ahead choosing the gifts that are made for older kids. This is not something bad but then the age designations are at the same time made with some safety guidelines in place. For instance, the gifts for older kids have in place some small parts that may be dangerous to those younger than them. A clear indication that you haven’t been paying much attention to the kid is when you choose a too babyish gift for a kid.

Ignoring to ask the kids their best fit

Before you go to the market for these gifts, asking the kids what they need is important, but also, it’s wise for the kids to know right that a parent reserves all the rights to make a selection of what to provide them. Most parents have over time gone for gift kid that is much hyped but with little play value, always try to choose your kids’ favorite.

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