Gift funds for a house downpayment
Hi Terry! I hope you are able to answer my question…my husband and I are buying a house in Indiana( we currently live in Illinois) and my mother in law( who lives in Florida) wants to gift us 70k towards our down payment…Mom is concerned about us having to pay taxes on her generous gift. Our mortgage broker stated that she can wire the funds to the title company a day or two before closing and complete a gift form, and this should avoid us having to pay gift tax.
Is there a way to avoid gift tax? Does it depend on the state and does this sound right??
Any information that you could provide would be appreciated!
I do enjoy listening to you on WGN radio when I get the chance!
Terry Says
There is NO gift tax — UNTIL the ultimate combined estate and gifts previously given total $11.2 million! (That’s the current law, anyway. It could be lower in the future.) So I’m guessing that this won’t apply in your situation — that your MIL’s estate won’t be over that $11.2 million level!
So don’t worry about gift taxes. Be very grateful, and follow the instructions of your mortgage broker. (They need the gift tax return to prove that this isn’t a “loan” adding to your indebtedness.) Other than that there is no issue with this gift.
And by the way, she is entitled to gift each of you $15,0o0 per year, exclusive of the combined estate and gift tax. So remind the broker that the truth gift in excess of the combined $30,000 is only $40,000. Still, for the mortgage process they may need proof that it is all a gift and demand the form include the full $70,000. Don’t worry about that. It won’t ever be an issue. How do I know? If she had over $11M in her estate, she’d probably gift the entire house to you!!
Further thought — please do make sure that she can “afford” this gift. One day, you may feel obligated to have her come and live in your guest room.
