Do you plan to give a loved one some money when you kick the can? If so, isn’t that a little selfish? Just give it to them now. Especially if they want to buy a house.
Let’s do the math: The IRS gift limit without tax ramifications is $16,000 per recipient.
Let’s say you have an adult child who is married. That means you could give up to $32,000 to help them get into a home and stop paying STUPID rent.
$32,000 is more than enough for a down payment and closing costs on the median priced home in Jackson County.
Why now? Because by waiting you may be cheating them out of much more than just the inheritance amount.
According to a January 17th Mail Tribute article, the median price from 2020 to 2021 had a 14% increase. If they buy a home for $350,000, they would have realized $49,000 in appreciation.
Here’s another key reason to gift now. Interest rates have been rising and all the talk is they will continue. Rates have gone up over 1% in the last 12 months. If rates move from 4% APR to 5% APR, then the buying power of a $2000/month principal and interest would go from $419,000 at the 4% APR rate to $372,500 at the 5% APR rate. Or $46,500 in less buying power. Ouch.
So by waiting to give your kids money to buy a home you are potentially cheating them out of nearly $100,000!
Not enough evidence? I looked at rents in Jackson County and found a home renting for $2,695 mo. I checked the value of the home and it is about $405,000 in this case. So if you don’t gift money to them now, a year later that rent totals $32,340, and two years would be $64,680 in wasted rent. Ouch again.
I had a professor in college at Washington State University say that no action is an action. If we do not act, that is an action. If there is a car wreck in front of your home and you don’t go out to help, you are in fact taking action.
For some, the equity in their home is the main asset and source of a future inheritance fund. I have assisted some in pulling out a portion of their equity and gifting it to their child now to assist in buying a home. I’m happy to run the numbers if you’d like to meet, have a cup of coffee and chat, or just give me a ring.
I wanted to share perhaps a different perspective on the topic of inheritance.
Contact Dave Porter NMLS#483876, Sales Manager with loanDepot at 541-708-4020 or dporter@loanDepot.com or on the web at www.davesporter.com
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