We are the helping-hand generation. All the surveys say so. Even when our kids are adults, we are ready--if we can afford it--to lend them money or gift them cash, especially for what we consider the Big Things. Chief among those biggies: buying a house. A survey this past spring reports that three out of four of our grown kids who recently bought their first home needed our help to afford the down payment, closing costs or other expenses.
For some of us, it's a guilty (should we be helping them out, still?) pleasure (we get to visit them in their nice home) that pays off. Yes, we might have struggled to do it on our own when we were young, but a whole lot of things have happened since then--including wild inflation in the cost of housing and a shakier economic foundation in the work place. Besides, many of us get a healthy return on our investments. Not necessarily in legal tender but in seeing our kids--and grandkids-- living in a solid house in a stable neighborhood.
Sometimes, though, that investment can run into trouble.If our children are married, there can be a divorce; if our child's spouse gets the house, where does that leave our gift? Or, if our child refinances and takes out $50,000 to pay for a five-star vacation or $100,000 for a BMW sports car, where does that leave our investment?
Some of those issues were addressed in a recent NYT story that warned of cautions to take when we help grown children with the purchase of a house.
Here are two key points from financial planners and mortgage experts:
--The divorce contingency: If the gift or loan is specified in writing as being a gift/loan only to one's child (and not the couple), in case of a divorce, the gift should not be considered mutual property available for division. Your kid's spouse may get the house, but the gift has to be repaid. If it's a loan, a repayment plan should be in place and both divorcing partners should be obligated by it--regardless of who is living in the house.
--The refinancing issue: If parents think their child may have over-spending issues--or that the spouse might--they can take the control-freak route. As terms of the gift or loan, they can require that their name by added to the title at closing. That gives them the right to be notified if there is an application to refinance as well as the right to approve or disapprove the refinancing--though not necessarily how their kids use that money.