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Lee Ginsburg is an award-winning Realtor with 30 years experience in Peninsula residential real estate. With the utmost attention to detail, Lee delivers expert marketing, negotiating, and management of all financial matters. With a strong commitment to honesty, fairness and hard work, Lee has successfully helped first time home buyers, move up buyers and investors.

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Thursday, January 8, 2009

Helping a Child Purchase a Home? Loan, Gift, Partner?

As parents we all love our children and only want to help them. In the Bay Area parents almost have to help with a down payment. Do you give your children a gift or a loan? Is it better to be a co-borrower with them? Maybe be partners. If you help one child, you have to help the others. California is a community property state and that creates other issues. It is difficult to bring it up but more than half the marriages wind up in divorce and gifting child money to purchase a home is possibly giving your child’s ex-spouse a very generous gift. Asking a child to sign a promissory note is not always comfortable. In many families Money is a “taboo” subject. I helped my son purchase a home with the idea he was to pay it back when he could. My wife and I always had a good relationship with my son so we did not see any need to have a signed document. Hope that does not come back to bite us. He got engaged a year later and married a short time later. A wonderful girl and we love her like a daughter. Before he got married I explained to him Community Property laws and advised him if god forbids he got divorced he still owed the money. I probably would not ask for the payment but I wanted him to understand the consequences. It is now almost 3 years later and we are very happy with our decision. I am writing this because most people are like me but some may not be as fortunate. A choice might be a loan and gifting the annual interest, another choice might be to be partners, or an outright gift. Whatever method of help you choose it will have tax and possible legal consequences for you and your child. I think anyone helping a child or any family member should speak with a lawyer and an accountant before loaning, gifting, or cosigning. I will close with what my father always told me; Don’t do as I do, do as I say. Wishing you and your children the best. www.leesellsmore.com

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