My parents and grandparents each gave my first husband and me $1K each as a gift towards a down payment. Since it was not a very large amount, there were no "strings"; it was a gift. They did the same for my brother and sister. This was 15 years ago. I think the gift tax had a $10K threshold back then, so it wasn't applicable.

There was some talk (back then) about getting the money in the bank ASAP if we were using it as a down payment. We didn't use it for the nonpayment (we used it for the incidentals of renovating), so were not in a rush. I can't recall exactly why it needed to be in the bank ASAP - probably something to do with the mortgage. Sorry I cannot be of more help.

My MIL gave us 5K for our first house about 20 yrs ago. It was below the 10K (now 12K) gift tax rule. She said it was better than just waiting until she died to give us the money. It really helped us!

i believe the gift tax doesn't come into play until 12k, after that it is taxable income.Also banks don't like to see large amounts of cash being deposited shortly before a purchase,so the earlier you can deposit it, the better off you'll be..If i recall, banks view "fresh" deposits of $$ as a "loan", even if it is from relatives...But perhaps an opinion by someone who has gone thru this will respond

Please note that $12,000 can be given to EACH recipient by EACH gifter. So, your SIL can be given $12,000 by both her mother and father, and your brother can receive $12,000 from both his MIL and FIL. That adds up to $48,000 total that can be gifted for the year.

And, as someone pointed out - gifting money during the living years can potentially help in avoiding estate taxes, although the IRS is aware of this practice and has been doing more to make sure the gifting allowances are not abused for that purpose.

I received some money from my parents when I got married, but it wasn't what I consider to be a really huge amount (actually my husband and I paid for our own wedding, so it was almost like a reimbursement), and I don't feel any more indebted to them than I already did for raising me, feeding me, loving me unconditionally...

When we bought our first place my mom gave us $5,000. The bank required a notarized statement from her that the money was a gift and there was no expectation of repayment.

That was close to 10 years ago, so don't know if things have changed since then.

I did something wrong, because my answer disappeared. Drat! Anyway, just to add to what jpok said - you can gift at least 48k and if your SIL is in a community property state it might be even more. It is a long time since I did tax work, but I believe that in addition to their separate gifts the couple doing the giving can also make a gift of community property to both the husband and wife and an additional gift to their community. It would depend on how their finances are set up, but as I recall that isn't particularly difficult. I believe they could give up to 84k without triggering a tax event. Even if there is a tax - it is not on the people on the receiving end, it is the duty of the givers to pay the tax.

One big question is can they afford the payments? It is all well and good to get a down payment, but that doesn't imply help with the on-going expenses

If your SIL is worried about strings, she is probably wise to refuse the offer. We accepted money and loans from my husband's parents, but never from mine. It wouldn't have been strings - it would have been ropes!

georgiamomma wrote: So, have any of you out there had financial help from family members? Did it work out, from a tax standpoint and personal standpoint?

Yes. My husband's parents gave us a sizeable amount of money that we used as part of the downpayment on our previous home. (They had built homes on property they owned for each of my H's four siblings but we couldn't live in NC, so they gave us the money instead.) It worked out great for us, with no excessive "meddling" on my ILs part. :)

As I understand it, each of the inlaws could give your SIL, her H and their child up to $12,000 each in any given year with out paying any gift tax (the donor is usually responsible for any tax due) up to a lifetime max of what I believe is a million dollars before the tax kicks in. So this year, each of your inlaws could give each of the three of them 12K, for a total from each of 36K, for a grand total of 72K with no gift tax due, providing that doesn't put the ILs total lifetime gift to any one of them over a million dollars.

If they are using the money for a downpayment, they can have the ILs write a gift letter stating that it is indeed a gift and no repayment is due.

Hope this helps!

Here is a link that might be useful: Estate and Gift Taxes

My mother, who was a realtor at the time, and I bought my first home together. It was a 2-family property, I lived upstairs and rented out the better apartment downstairs.

That was over 20 years ago. But, it worked out great. I lived there for 7 years, was responsible for the mortgage payment taxes, insurance and most repairs. She helped when the roof needed to be torn off and replaced.

And I was the lucky one :>( to play landlord. An experience I've never wanted to repeat. At the end of 7 years I sold my equity back to my mother and bought my own single family home. She had other rental properties at that time.

Having Mom help me buy my first home enabled me to buy my first home in my early 20's and I've been lucky to build on that.

If your SIL doesn't want to deal with a gift, have the in-laws set it up as a loan. They can charge whatever payment they mutually want. That way the second point will not come into play, since the loan is being paid back.

And the third point, in todays market it is extremely difficult in some areas to be able to afford to move up. If she really wants this, she should swallow her pride and do what she thinks is best for her immediate family. She certainly doesn't have to tell anyone she was givien money, or tell them anything for that matter.

We not only got financial help from my in-laws to buy a house, we actually bought their house! They were moving and their house was perfect for us, but it was a bit out of our price range. So, they gave us a "gift of equity" of that allowed us to purchase the house for fair market value.

They worked with their long-time lawyer and accountant so that we could be sure everything was legal and none of us would have to pay gift taxes. In our case, no money actually changed hands, it was just a line on the closing documents.

As others have said, each parent can gift each member of the couple up to $12,000, so as long as the gift is not more than $48,000, their should be no tax implications. As far as personal implications, that will really depend on the individuals involved. If they are the type that believes that their money entitles them to decide how you live your life, than you are probably better off not accepting money from them.

My in-laws are not like that at all, so it has worked out very well for us. In fact, we had been going back and forth on whether or not to buy their house because I felt "weird" about it. They did not pressure us or try to influence us in any way, but they were thrilled when we decided to do it, because they knew how good it would be for us. We're thrilled too!

Be very careful when accepting money to buy a home. Mortgage companies often want several months of bank statements from you, and receiving lump sums of cash from anyone often makes them uneasy.

I agree with devorah-
Even after help with the downpayment, will they be able to keep up on the extra expenses associated with a bigger, more expensive home? (mortgage, taxes, maintenance & upkeep).
And, if she's worried about "strings," she's probably going to have strings. I'm still paying back the $10K I got from my mother over 15 years ago, mentally & emotionally, even though if you added up the twenties & fifties & hundreds & the car I gave her, it would add up to more than double what we got in one big chunk. And from my in-laws experience, there's also the jealousy factor with the other siblings, and it has the potential to just go on and on.
Good luck!
Lisa A.

I've never received money but we did do this for our son.

When he turned 21, we gave him a new car. Then, at 22, he graduated from college & got a good job. We knew he'd be hit hard on taxes so encouraged him to buy a condo rather than rent. He was seriously dating a young woman who has since become his wife.

We suggested he leverage the car for the down payment on the condo. This was back in 1994. So, he took the money from the new loan on his car & purchased a condo in Exeter, NH. Sold the condo 22 months later when he received a job promotion & transfer out-of-state...nearly doubling his money. Then, his still fiancee needed a new car. He now had a company car. So, he sold his car to her & repaid his car loan. They married & drove the car for the next 8-9 years selling it when their second child was born & they needed something larger.

So, in a contorted sort of way...we helped him with his first home.

Tricia

we turned down $$ from our inlaws.

the money was free, but the cost was way too high.

husbands' brother took the money... and the cost was even higher than what we thought it would be.

FIL believes he purchased a say in everything that my brother in law does

We worked hard and saved for 20 years to build a house. No financial help, gifts, or inheritance ... just lots of hard work.

The gifter of the money is always responsible for any tax burden. Any money received as a gift is not taxable to the recipient.

Beware that if any gifter lives in NJ and they die within three years of giving the tax free gifts, that amount is added back into their estate by the NJ state govt and it is taxable.

We gave each of our kids $10,000 when they got married to be used for wedding or house. Only statement we gave with it was that we thought it should be used toward a house, but their decision.
DD used it to pay for her wedding.
2 DS's used it toward houses when married.
1 DS is getting married next week and hasn't gotten his $$ yet. Said he would like to wait a bit til they decide what they want to do with it.
I think it worked out well.
Kathy G in MI

"Beware that if any gifter lives in NJ and they die within three years of giving the tax free gifts, that amount is added back into their estate by the NJ state govt and it is taxable."

In that exact situation if someone does die in 2 1/2 years after gifting a large amount of money to many people and the estate now has tax liabilities greater than the assets how does the State get it's due? Secondly, what executor/executrix will waste their time?

garysgirl03 said: As others have said, each parent can gift each member of the couple up to $12,000

I believe each parent (in law) can give the child up to 12K a year as well....

My inlaws didn't give my husband money but they provided a substantial interest-free loan when he purchased his first home (before we married). But as others have said, this depends so heavily on the relationship and attitude of the people involved. In my husband's family there is no feeling of negative obligation at all, only a team, can-do spirit that is really admirable.

We saw the other (dark?) side of it when we bought our current home. Another couple outbid us initially only to have to back out a few days later when the parents came to inspect, didn't like it and refused to give them the money they were counting on to buy it. So there's a perfect example of how this can be a very negative experience. I've always been happy we didn't have to depend on someone else to have our home!

When we were first married, my MIL loaned us most of the downpayment on our first home. We paid her the same rate of interest as our mortgage, and paid her back on a schedule. It worked out well for both of us. We got cash when we needed it and she got a bit of income.

We have done the same with 2 of our daughters, one has paid it back entirely, the other, who borrowed 2 years ago, is still working on it. They pay at the rate of our HELOC, from which the money came, so it is revenue neutral for us.

We got about 5K from my FIL when we bought our first house, and $5K from him again this time and from my father. It is considered in light of an early inheritance-- they would rather see us enjoy it now :)

The only one who helped us buy our house was Bank of America. My parents raised 6 kids in a small house and I don't think their house originally cost as much as a you now pay for a new modest vehicle.

We talked about buying my mother in laws house, as she is getting older. She would live with us afterwards, but we would be the owners. We lived with her briefly while working on our house (as other first home was sold before this one was ready) but we quickly knew we were not meant to live together! Lucky we had a bit of trial first!

We intend to help our daughter and to-be husband buy their first house. We can afford to, and since's she our only child, she'll eventually inherit everything. By that time, hopefully, she will need the money much less than she does now.

Strings attached could be a big problem for some people. We are very careful not to interfer in their lives and don't intend to in the future. But I can't speak for your SIL's inlaws. The very fact that she's brought up the issue of strings attached would make me wonder how well this might go.

My MIL a few years ago set up joint accounts w/ each of her kids. She has an intense distrust of lawyers (hence, no will) so this is how she's passing on her money. I tried for a while to get her to write a will and power of atty (FIL had dementia and used to walk around w/ thousands of dollars in his hand; would have been handy to be able to deposit his SS checks and keep them away from him) but gave up in the end.

We used a good-sized chunk of one of these accounts for our down payment. We probably could have still bought the house without it, but this way we didn't have to liquidate any investments, and the payments aren't too high. She's pretty low-maintenance--no trying to run the kids' lives.

The OP's inlaws might want to try scrimping and saving for a while and see if they can't make their own down payment. Or, add a room. Finish the basement. Since it seems like they might run into problems. If you have to worry about possible strings, then they're definitely there.

Money and families often don't mix well.

newjerseybt:
In that exact situation if someone does die in 2 1/2 years after gifting a large amount of money to many people and the estate now has tax liabilities greater than the assets how does the State get it's due? Secondly, what executor/executrix will waste their time?
===============

I don't know the answers, NJ. My MIL gifts us 10K every year because she was left with alot of money after FIL died and she does it for the tax breaks. She is in the process of getting ready to sell her house in Piscataway and moving to another state to avoid this tax situation. Her estate definitely has the money to support the additional tax if she dies before she moves.

housenewbie- you might want to look into the ramifications of having joint accounts with your MIL. The money in those accounts could create a tax burden for her kids. Also, one should NEVER add their kids to the title of their house. When they die, that amount will be added to the estate taxation and the kids will have to pay estate taxes on it.

Instead of your MIL having joint accounts with her kids, she should set up a trust which would be tax free to the heirs. The only drawback is she'd need a lawyer to set it up.

We are buying our third house, sold one house without any help from my in-laws or my mom. I'm sure they would love to help, but they don't have the means.

But if they helped us financially to buy a house, I bet they'd think that they have a say in every aspect of home-buying and beyond...my in-laws;)

We're planning on helping our two boys when they buy their first homes, but that won't happen for a while, as they're only 9 and 10.

Unfortunately, my help came from the inheritance I received after my mom's passing - I would much rather live in a shoe box and have her here...breast cancer is awful.

On a brighter note, I have a lovely painted portrait of my mother hanging prominently in my entry hall - every time I come home I see mom and think of her tremendous courage. I also got a piece of art that she painted in middle school that hangs across the entry hall. I think these little reminders help me keep focused on what really counts - family.

Of course, I only used a percentage of the inheritance, as I would like to one day help my children with college, marriage, down payments, etc...

I don't think I would accept the help if it was me, even if I had the world's most perfect in-laws and wasn't concerned about strings or taxes in any way. Like one of your SIL's points, for me, it would be about standing on my own feet and taking care of myself as an adult without getting help from the folks.

For what it's worth, I've read a couple of the Millionaire Next Door books over the last few years. The author is very down on this kind of help for several reasons, including the fact that he feels that it weakens the recipient. Part of his reasoning is that if you accept help so that you can live in a neighborhood that's beyond your means on your own salary, you put yourself in a difficult "keeping up with the Joneses" situation.

I may as well also mention that in addition to thinking about how accepting the money might affect her relationship with her in-laws, she might also want to consider how it could affect her relationship with her husband. She knows her own relationship best, of course... but I know of one couple that (in my opinion) got divorced partially because they accepted help from the wife's parents, both when buying their house and on an ongoing basis. The wife had no problem with getting into financial crisises and then getting help from her well-off parents. The husband, however, was very uncomfortable with the situation and wanted her to stop spending so much so that they wouldn't need bail-outs. It created a huge strain between the two of them. Your SIL and BIL may not have some of the other underlying problems that this particular couple had, but it might be something to think about.

I think there is a misconception about gifting in most of the preceding posts. The $12K amount is not a limit. It's simply the threshhold at which the donor has to file a gift tax return. And that's just so the IRS can keep track. Unless it's a really huge amount of money, it doesn't trigger any taxes. This is an exact quote from the IRS web site:

"Generally, you do not need to file a gift tax return unless you give someone, other than your spouse, money or property worth more than the annual exclusion ($11,000 in 2002, 2003, 2004 and 2005; $12,000 beginning in 2006) for that year. Although a return may be required, no actual gift tax will become payable until the cumulative lifetime taxable gifts exceed the applicable exclusion amount. The donor is primarily responsible for the payment of the Gift Tax."

So, unless someone is going to be getting more than a million bucks or so, taxes are not an immediate issue. The only time the $12K amount is a consideration is when someone expects to have an estate of millions of dollars and wants to legally whittle down their assets each year by giving as many $12K gifts as they can (since none of these "small" gifts are taken into account by the IRS upon the death of the donor). As only 1-2% of estates have enough in them to trigger estate taxes, most of us don't have to worry about this.

Having said that, I think it's always a bad idea to be beholden to anyone for the roof over your head. Large gifts of money can produce strains, and affect even the best of relationships in unpredictable ways. When I was about 25, I wanted to buy a house and didn't have enough for a downpayment. I asked my father for a loan, and he wouldn't do it. I was angry for a while, but, when I got over it, I realized it was a really good thing, and I appreciated his decision more and more as I got older. For one thing, it reinforced to me that there is merit in living within one's means, and that has kept me solvent and out of the clutches of credit card companies my whole life. I was also glad that, when I later had occasional differences of opinion with him on other matters, I could do what I felt was right for me without being obligated to him because of a loan or a gift.

"So, unless someone is going to be getting more than a million bucks or so, taxes are not an immediate issue".
-----------------
State taxes are usually the killer tax and may not have a million dollar threshold. That is why the United States has
the highest or one of the highest (Japan?) death taxes in the world.

newjerseybt-
Well, the discussion seemed primarily focused on Federal taxes, and what I posted was correct. You make a good point that some states treat estates differently from how the Fed does, and sometimes collect their own levy. But are you also saying that some states levy gift taxes that must be paid the year they are given, or are you just saying you don't like the fact that estate taxes exist?

In any case, I suspect most of us won't fall in the couple of percent of estates that are significant enough to have much, if anything, taken out in taxes. If I'm one of the lucky ones who ends up a millionaire, it's ok with me if some of that gets taxed by the country that made it possible. On the other hand, if you're a really wealthy person and want none of it to go to the government, I can appreciate that point of view, too. This is one of those issues on which reasonable people disagree...

Hi, I am new here and just wanted to add my story. My husband and I were looking for a new house last year. We were living in a mobile home, with our 2 small children, and were ready to move into a better neighborhood. We found a house, but due to our credit, we would have to pay huge interest rates and pay a huge down payment. My parents wanted to help. They got a loan for the house, and we moved in. The only stipulation being that we paid the payment on time, and worked with their lender on our credit. Six months later, our credit scores were way up and we purchased the house from my parents. Best decision we have ever made.

DH's parents (French) are both retired schoolteachers who live in a comfortable house in a small town in the south of France. They live modestly, but not cheaply, don't travel or eat out much, and the state sends them money for retirement every month. DH doesn't see them much - just for holidays, when all three of his siblings and himself head down to their house for a few days.

They came to our small civil ceremony in Paris for our wedding and brought a white envelope as a gift. Later after all the festivities, we settled in at home and opened up the envelope..... To our utter shock and amazement, they had written us a check for $50,000.

We used nearly all of it for our down payment.

Nice story, running in nova ...

My mother and I bought my first house together as joint tenants with right of survivorship. She provided the downpayment and her credit; I paid all the mortgage payments and kept the house in good condition. She did not ever live in the house. After purchase of the house, she rewrote her will such that any inheritance I received would be minus what she had spent on the house purchase. It worked out very well, because I had a good place to live and what turned out to be a good investment, and there were no bad feelings in the rest of the family (AFAIK). My mother also had the enjoyment of seeing her contribution improving my life.

Note that at that time (about 15 years ago), you could actually buy a decent house in our area and end up with monthly expenses less than you'd pay in rent, and come up with 20% down from what you might actually have in a modest savings account. It seems like a dream now.