As home prices have remained elevated, many parents are stepping in to help their adult children purchase a home. If you’re considering doing the same, it’s worth understanding the different approaches available to you and how each one could affect your own financial plan.
There is no one-size-fits-all answer. The right approach depends on your financial situation, how much flexibility you have in your retirement plan, and your relationship with your child. Here is a breakdown of five common options, along with the key considerations for each.
1. Gifting Money for a Down Payment
Gifting funds directly to your child is generally the most straightforward option. The money is theirs with no expectation of repayment, and it can be applied toward a down payment, closing costs, or both.
For 2026, the annual gift tax exclusion allows you to give up to $19,000 per recipient without filing a gift tax return. If you and your spouse each make a gift to the same person, you can combine your exclusions for up to $38,000 per recipient without gift tax reporting.
Gifts above that amount are not necessarily taxable. They simply count against your lifetime gift and estate tax exemption, which is currently $15 million per individual.
The key consideration with gifting is that the funds are gone permanently. Before making a significant gift, it’s important to model the impact on your long-term retirement projections. A $50,000 gift, for example, represents not just the dollars given today but the growth and income that money would have generated over the course of your retirement.
2. Making an Intra-Family Loan
An intra-family loan allows you to lend money to your child rather than give it outright. When structured properly, this approach gives your child access to funds at a lower rate than they’d find at a bank, while you receive interest income in return.
To be recognized as a legitimate loan by the IRS, the arrangement must charge at least the Applicable Federal Rate (AFR), which is published monthly by the IRS and is typically below conventional mortgage rates. The loan must also be documented with a written promissory note and include an actual repayment schedule.
The practical challenge with family loans is follow-through. Without consistent repayment, the IRS may reclassify the loan as a gift, creating potential tax implications. It’s also worth having an honest conversation with yourself about whether you’d be comfortable enforcing repayment if your child’s financial situation changed. Many family loans quietly become gifts over time, which may be fine as long as that’s accounted for in your plan from the start.
3. Co-Signing on a Mortgage
If your child qualifies for a home loan but not at the best terms, adding your income or credit history as a co-signer can help them secure a better rate or a higher loan amount.
What many parents don’t fully anticipate is the effect on their own financial profile. When you co-sign a mortgage, that loan appears on your credit report and counts against your debt-to-income ratio. If you plan to refinance your own home, take out a line of credit, or apply for any other type of financing, the co-signed mortgage will be factored into those decisions.
You are also equally responsible for the debt. If your child misses a payment, your credit is affected. For this reason, co-signing tends to work best when your child has a clear plan and timeline to refinance into their own name, typically once they have established more income history or reduced other debt obligations. Getting that plan in writing before you co-sign is a reasonable step to take.
4. Purchasing the Property Yourself
Some parents choose to purchase the property outright. They then allow their child to live there, either rent-free, at below-market rent, or through an equity-sharing arrangement where the child gradually buys in over time.
This approach can function as a real estate investment, but it comes with complexity. Rental income is taxable, and the tax treatment of the property depends on how it’s used and how the arrangement is structured. An equity-sharing agreement requires careful legal documentation to protect both parties, particularly in scenarios involving marriage, divorce, or a future sale.
If this option appeals to you, we recommend working with a real estate attorney and a CPA before moving forward. You can also talk with your financial advisor to better understand the potential impacts on your financial picture. The structure matters significantly and getting it right from the beginning is far easier than unwinding a poorly documented arrangement later.
5. Helping With Closing Costs or Monthly Payments
Not every form of financial assistance involves a large lump sum. Some parents prefer to help in smaller, ongoing ways, covering closing costs (typically 2–5% of the loan amount), contributing to monthly mortgage payments for a defined period, or helping with moving and setup expenses.
This approach tends to be more sustainable for parents who want to help without making a significant one-time commitment. It also provides more flexibility to scale back if your own financial picture changes. Finally, it tends to carry fewer legal and tax complications than the other options on this list.
How Financial Assistance Affects Your Retirement Plan
Regardless of which approach you choose, the most important step is to understand the impact on your finances, particularly retirement, before you commit. This is true even when the amounts feel manageable.
To put it in practical terms: A $60,000 gift from a portfolio of $800,000 is not just 7.5% of your savings today. Depending on your withdrawal rate and how long you expect to be in retirement, that $60,000 could represent several thousand dollars per year in retirement income over a 25- or 30-year period. That may still be the right decision, but it should be a deliberate one.
Our general guidance is that helping your children should not require you to delay your own retirement, reduce your standard of living in retirement, or draw down funds you are counting on for healthcare or longevity. Running a projection with your fiduciary financial advisor before making any significant commitment is time well spent.
Addressing Fairness When You Have Multiple Children
If you have more than one child, financial assistance to one will almost always raise questions of fairness, whether spoken or unspoken. There are several approaches families use to navigate this.
Some parents document gifts and loans formally, with the intent to offset those amounts against that child’s share of the estate in the future. Others prefer to give equally in the moment, even when one child needs it now and another does not. Still others make it a point to communicate openly with all of their children about what they provided and why, and to commit to comparable assistance when other children are in a position to benefit.
There is no universally correct approach, but clarity can help minimize conflict. A proactive conversation, even a brief one, can prevent misunderstandings that linger for years. If this feels like a difficult conversation to initiate, your financial advisor can help you think through how to approach it.
Working Through the Decision
Helping a child purchase a home can be one of the most meaningful things you do with your wealth. It can also have real implications for your own financial security if it’s not planned carefully.
If you’re weighing your options, we’d encourage you to start with a conversation about your own retirement plan before committing to any specific approach. Understanding what you can afford to give, lend, or guarantee, and how each option fits into your broader estate and tax picture, could help you make a decision you feel confident about for years to come.
At Hassell Wealth Management, we help clients talk through concerns like these, providing an objective perspective so they can make informed decisions. Schedule a complimentary 30-minute discovery call with our Wealth Advisors.