Legal Question in Real Estate Law in California
Co-owners or gift?
1.Our son and his wife are purchasing a house in CA. We are helping with the purchase by contributing to the downpayment and closing costs. We will also contribute to the monthly payment. I have been looking for a simple agreement that would cover our arrangement as co-owners.
2.My wife and I have concerns about the tax consequences when the house is sold. Would it be best to gift the money to our son for all of the beginning costs and the payments? We would then still be on the mortgage and note, but not on the title.
3.We have considered both options and are looking for other ideas and thoughts.
3 Answers from Attorneys
Re: Co-owners or gift?
far too compicated to answer here, both as to tilte, credit, estate planning and income tax consequences -- not alone family lawin case they divorce, bet you didn't want to think of that one --- soooo if you wish to consult with me i would be happy to do so --- but far too compicated as you put you question for a quick, dark and dirty "simple" answer
Re: Co-owners or gift?
No matter what, you will need a formal, detailed co-owner agreement. There are tax consequences to consider, protection of your interest if, for some reason, your son cannot pay his share, the possible danger to your credit standing (if you are on the loan), etc.
Both you and your son and his wife need guidance on this matter.
Re: Co-owners or gift?
In answer to the first question, the agreement can be fairly simple -- it must cover six or eight issues and be in writing, preferably notarized -- but it must be custom-drafted for the situation based upon the drafting attorney's full knowledge of the parties' intentions and needs. No preprinted form or dowloadable boilerplate will suffice. I would envision several pages and 12-20 clauses.
The tax issues alone include interest deductibility, possible depreciation, capital gains, gift and inheritance tax aspects.
Handling this matter will require an attorney to work on two phases: first, figuring out the best deal for all concerned (or for his client), then documenting the deal in a four-party contract that covers the foreseeable issues and problems.
I can do the second part for you. If you have a tax and/or estate-planning advisor, they should be involved in structuring the deal, perferably working along with the attorney who documents the gouse deal. If you don't have such advisors, I could also provide advice about deal structure, bit I would need more information such as where the deal stands now (i.e. is escrow open and is there a loan commitment, and if so, is it based upon your proposed involvement) and also your personal financial (tax, estate plan) situation.
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