We recently received a question from a client: “Can we gift equity in our home to our child/children?” The short answer is that it depends. Typically, you can gift equity in a home that you own when you sell that home to your child. This is called a “gift of equity.” Most lenders will allow a gift of equity as long as the gift is documented correctly, which means that it must be based on an accurate appraisal and clearly stated in the purchase and sale agreement.

What if you are buying a home that is not owned by a family member and your family wants to give you money to assist in purchasing the home? This is referred to as a “gift of funds.” It is easy to confuse a gift of equity with a gift of funds. It is important for the home buyer to talk to their lender and those that are giving that gift should speak with their CPA to make sure they are not unintentionally making a tax or estate planning mistake. A gift is not a loan. A gift is irrevocable. Once delivered and accepted, the person making the gift has no right to ask that the funds be repaid. This will be certified to the lender that the lender will not seek repayment.

If you have any questions about equity, contact Stiles Law by calling (781) 319-1900.

Copyright © 2019 Stiles Law, All rights reserved. Stiles Law is a Massachusetts licensed law firm and all content is based on Massachusetts law. The information presented above is meant to be used for general informational purposes and it should not be construed as legal advice or legal opinion on any specific facts.