It is a widely known fact that more adults are still residing at their parents home in 2018 than in the past. According to Financial Post, this number has increased 13.3% since 2001. With home prices that continue to rise with no end, it is becoming more and more difficult for young people to save up enough to purchase a home. Rental prices have also increased significantly, naturally leaving only one option for Millennials which is to continue living with their parents.
In light of this current situation as well as their own frustration, many parents who are able to choose to help out by gifting a sum towards a down payment for a home. A recent poll conducted by CIBC shows that 76% of Canadian parents are willing to financially help out their kids so they can move out or get married. If you are a parent who is looking to provide some financial boost, a monetary gift is a very sensible option among others.
Gifting money towards the purchase of an asset is a way to get rid of the estate tax your kids would pay later on in the future. It can also prevent any haphazard spending that could happen if the money were to be gifted in the form of straight cash. If you were to gift a property, it will be treated as a sales transaction by Canada Revenue Agency and will occur a tax bill for 50% of the capital gains. With regards to legal implications, gifting a down payment or a portion of it severs any tie or liability you have with the money. No liability will fall on you regarding how the money will be used. The other option of co-signing or guaranteeing the loan can place a lot of financial risk on you if things go wrong and your child can’t pay the mortgage.
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