If your child is trying to buy a home and you’re in a position to help, you’re not alone. With home prices and mortgage rates remaining high, many first-time homebuyers are turning to family for support. The typical down payment reached $63,000 in 2024, and monthly mortgage costs are still near record highs. According to a Redfin survey, nearly one in four Gen Z and Millennial homebuyers recently used financial help from their family to make it happen.

Helping your child buy their first home can be a smart financial decision for your family, but only if it is handled the right way. Without proper planning, your gift of real estate can trigger unexpected tax bills, create tension among relatives, or cause legal complications down the line.

This guide outlines the best ways to help your child purchase a home and highlights the most common mistakes to avoid when gifting real estate to a family member. Before making any final decisions, be sure to seek the advice of your family legal, financial, tax, and estate planning professionals!

Three Smart Ways to Help Your Child Buy a Home in Today’s Market

1. Give a Cash Gift Within IRS Guidelines

One of the most straightforward ways to help your child buy a home is by giving them cash for a down payment or closing costs. In 2025, you can give up to $19,000 per person or $38,000 as a couple to each child without needing to file a gift tax return. If you give more than that amount, it simply reduces your lifetime gift and estate tax exemption, which is currently $13.99 million per person.

If your child is using a mortgage to finance the home, their lender will likely require a gift letter that states the money does not need to be repaid. This simple step can avoid complications and keep the transaction above board.

Giving a cash gift is one of the cleanest ways to assist with a home purchase without creating ownership complications or tax issues for your child later.

2. Provide a Family Loan with Formal Terms

If you want your child to have financial responsibility in the process or you prefer to retain some control over the funds, consider offering a formal loan. Acting as the bank can be a win-win, but it is essential to do it correctly.

A family mortgage loan should include a written promissory note, an agreed-upon interest rate that complies with IRS minimums, and a repayment schedule. This ensures the loan will not be misclassified as a gift and protects both parties legally.

To enhance the benefits, you can forgive a portion of the loan each year under the annual gift tax exclusion. This allows you to gradually turn the loan into a gift while minimizing tax liability.

A CPA or estate planning attorney can help you structure the loan properly. This step is critical if you want to avoid misunderstandings or IRS scrutiny in the future.

3. Set Up a Trust to Gift Real Estate or Protect an Asset

If you plan to give your child an entire property or want to ensure the home stays in the family, creating a trust can be a strategic solution. Trusts are not only for the ultra-wealthy. They are often the best way to transfer real estate to a child without going through probate or creating unnecessary tax exposure.

You have two main options:

• Revocable trust: This type of trust is flexible and allows you to make changes during your lifetime. It helps your estate avoid probate and allows property to pass directly to your child after your death.

• Irrevocable trust: This option is more permanent but provides stronger asset protection. It can shield the home from lawsuits, creditors, and divorce while offering potential estate tax savings.

Trusts are especially helpful when multiple children or heirs are involved. You can use the trust to outline exactly how the property should be used or divided, which reduces the chance of family disputes later on.

Three Common Mistakes Parents Make When Giving Real Estate to Their Children

1. Adding a Child to the Property Deed

It might seem simple to just add your child’s name to the home’s title, but this decision can create more problems than it solves. Once your child becomes a co-owner, you may lose full control over the property.

Additionally, when the home is eventually sold, your child will be taxed on capital gains based on your original purchase price. This could result in a large tax bill, especially if the property has appreciated significantly.

You also expose the property to risks if your child is sued, goes through a divorce, or faces financial trouble. These scenarios could affect your shared ownership or force a sale.

2. Relying Only on a Will to Transfer the Home

Leaving your home to your child in a will is legal, but it is not always the most efficient or protected option. A will must go through probate, which is a public legal process that can take months and generate costly fees.

A will also does not shield the property from creditors or help with estate taxes. It cannot set conditions or ensure privacy. In contrast, a properly structured trust can transfer ownership smoothly while offering more legal protection and flexibility.

3. Selling the Home to Your Child for One Dollar

Selling a property to your child for a very low amount may seem like a clever shortcut, but it is a common mistake. The IRS still treats this as a gift, and it can lead to confusing documentation and unexpected tax consequences.

Your child also inherits your original cost basis, which means they could owe a large capital gains tax if they later sell the home. This strategy creates the disadvantages of both a sale and a gift without providing the legal or financial benefits of either.

There are better and safer ways to transfer real estate to a family member that align with current tax laws and estate planning best practices.

Final Thoughts on Gifting a Home to Your Child the Right Way

Helping your child become a homeowner is a generous and meaningful step. In today’s competitive housing market, family support can make all the difference for a first-time buyer.

However, real estate gifting strategies must be approached carefully. Whether you are giving a down payment, transferring a full property, or using a family trust, it is important to plan thoughtfully and consult professionals when needed.

If you are considering helping your child buy a house in North Carolina and want to understand your options more clearly, I am happy to connect you with experienced estate planning attorneys, CPAs, or mortgage advisors who specialize in family real estate transfers.

Reach out to me directly via my email and let's connect. Your good intentions should build a legacy, not a liability.

Thanks for reading!

Brandon Yopp