How to Help Your Kid Buy a Home Without Creating a Mess

So your kid wants to buy a house, and you're ready to help. Good move, but only if you do it the right way.

Today’s first-time buyers are up against steep challenges. Prices are high, interest rates are relentless, and the average down payment hit $63,000 in 2024. According to Redfin, nearly one in four Millennial and Gen Z buyers recently used family support, whether through gifts or inheritance.

Helping your child buy real estate isn’t about spoiling them. It’s a financial strategy that can set them up for long-term success. But if you don’t plan carefully, even the most generous help can come back to bite you.

I’ve seen it all: unexpected tax bills, legal problems, fractured relationships, and properties tied up in probate. You don’t want that.

Here are three smart ways to support your child’s home purchase and three common mistakes to avoid.

Three Smart Ways to Help Your Kid Buy a Home

1. Give Them Cash the Right Way

Gifting cash is the simplest route as long as you stay within IRS guidelines. In 2025, you can give up to $19,000 per person or $38,000 per couple each year without triggering any IRS reporting requirements.

Go beyond that and it begins to chip away at your lifetime gift exemption, which currently sits at $13.99 million per person. Still no taxes owed unless you cross that lifetime limit.

The money can be used for a down payment, closing costs, or to improve loan terms. If your child is getting a mortgage, you'll need to provide a brief gift letter confirming that the funds do not need to be repaid.

2. Become the Bank

If you want your child to have some skin in the game, consider setting up a formal family loan.

You become the lender. They make monthly payments. Everyone wins.

Even better, you can forgive part of the loan each year under the $19,000 limit. That allows you to convert a portion of the loan into a tax-efficient gift over time.

The key is structure. The IRS expects a formal promissory note, a repayment schedule, and an interest rate that follows federal guidelines. Skip these steps and you risk having the loan reclassified as a taxable gift.

Work with an estate planner or CPA to get the documentation right. It’s a small step that prevents major headaches later.

3. Use a Trust to Transfer Real Estate

Trusts aren’t just for the wealthy. If you’re planning to transfer property, or want to protect it from potential future issues like divorce or creditor claims, a trust is worth considering.

You have two options:

• Revocable trust: Flexible and easy to update. It allows you to pass on property without probate.

• Irrevocable trust: More rigid but offers better asset protection and can reduce estate taxes. It also lets your child use the home during your lifetime.

Trusts can also simplify co-ownership. If you want multiple children to share a vacation home or rental property, a trust can define responsibilities and distribute income clearly.

Three Mistakes That Can Blow Up Your Plan

1. Adding Your Child to the Deed

This one looks like a shortcut, but it’s a trap.

By adding your child to the deed, you give up control. They can sell, refinance, or rent the home without your input. Worse, if they go through a divorce or face a lawsuit, your shared property is now exposed.

There are also major tax implications. When they eventually sell the home, they’re taxed based on your original purchase price, which can mean a much larger capital gains bill.

Avoid this move. It creates more problems than it solves.

2. Relying Only on a Will

A will might seem like enough to pass on property, but it comes with baggage. Your estate will go through probate, which is a public, expensive, and time-consuming legal process.

Wills also don’t provide tax advantages or any real control over how the property is used or distributed.

A trust does all of that and more. If real estate is involved, a will alone won’t cut it.

3. Selling the Property for One Dollar

This is one of the most common myths. Selling your house to your kid for a dollar sounds clever. In reality, it creates more confusion and tax issues than it’s worth.

The IRS treats the difference between fair market value and the sale price as a gift. Your child also inherits your original cost basis, setting them up for a massive tax bill if they sell in the future.

You end up with a bad gift structure, no tax benefit, and a messy paper trail. There are smarter ways to do this.

Final Thoughts

Helping your child buy real estate is about long-term strategy, not handouts. When done right, your support becomes a financial foundation that builds equity and security for the next generation.

When done wrong, it can lead to legal, financial, and emotional fallout.

If you’re considering helping your child buy a home, don’t guess. Let’s make a smart plan.

Need a referral to an estate attorney, CPA, or lender who specializes in family transfers? Reach out. I’ll connect you with the right experts to get it done cleanly and correctly.

Because giving your kid a house should never mean giving them a headache too.