Is there a risk in asking my lawyer or accountant this question?

[LAS14]

We want to lend our son $30,000 or more for a down payment on a house in about two years. I was thinking about "giving" him that money now so it wouldn't show up as a loan when he's applying for a mortgage. This sounds like it's skirting the edge of legality. I'm sure if I were in the top 1% some lawyer would arrange it for me.

My question is, would I get myself in trouble by even asking a lawyer or accountant if I could get away with this?

tia
las

[Lochloosa]

1. Asking for advice is why you have a lawyer or an accountant.

Why should you get in trouble?

[W_HAMILTON]

2. I may be a bit off on the specifics...

…but I think you and your wife can gift your son $28,000 ($14,000 between the two of you) each year without having to pay gift taxes on it. I'm not sure why you would get into any legal or accounting trouble by asking such a question, so, I would recommend doing so just in case there is something about your specific case I may be missing.

[leftieNanner]

5. Yes, you can gift the money without tax consequences.

For 2018, the amount was $15,000 per person. Don't know what it is for 2019. And your idea to make the transfer before he is applying for a mortgage makes sense. He just needs to not spend it!

No harm in asking your tax professional about this, though.

[LAS14]

18. Thanks. I'd forgotten about the gift rule. But I think you can't do it...

... to circumvent the law. That is, would it be illegal for him to pay me back?

[dbackjon]

24. He could gift it back

You would be fine.

[The Velveteen Ocelot]

3. Communications between a lawyer and a client are privileged.

If what you are trying to do is illegal or fraudulent the lawyer will advise you not to do it but, he/she can't tell anyone that you asked. If the lawyer helps you commit a crime or fraud, though, the privilege is lost. One thing to keep in mind is that if you give your son the money there could be a gift tax issue because any gift you make of more than $14K in a calendar year has to be reported to the IRS.

[former9thward]

11. No gift tax

1) First the gift tax is $15000 per person giving in 2018.

2) There is no gift tax owed no matter what until you have given 11.18 million in your lifetime

3) The OP says in the post they want it to be a "loan" but they want to hide that fact by appearing to give the money two years in advance. The fraud would be on the bank not the IRS. The loan can be structured with a very long payback period and forgiveness upon death of the loaners. If the son wants to pay back earlier that is his business. They should disclose to the bank upon mortgage application. The bank will not care about it and it won't be factor whether or not the son gets the mortgage.

[The Velveteen Ocelot]

15. My point is that it has to be *reported* whether or not a tax ever has to be paid,

because the IRS keeps track of lifetime gifts in consideration of the ultimate estate tax. So if they want to call the money a gift they will have to report the amount over (now) $15K. If they want to hide the loan from the bank by calling it a gift, they have to report the gift; if it's a loan and the son doesn't tell the bank there could potentially be a bank fraud issue. That's what they need to talk to a lawyer, who could help them structure a loan, as you suggested, that wouldn't affect the mortgage. They shouldn't lie to either the bank or the IRS, but what they tell the lawyer is privileged.

[MaryMagdaline]

4. No. Ask your lawyer.

There’s nothing wrong with the gift except the limit used to be 14k before it was taxable.
It’s your SON who may be asked to disclose sources of funds and HE cannot lie on any applications. The bank may or may not ask. You may want to keep a record of the gift in case he needs to disclose. Gift from parents is very normal. I had to disclose gift from in-laws on first house (it helped us qualify) and I remember my brother had to show the actual copy of the will where my mother gave him a cash gift. Unexplained income is sometimes worse.

But yes, speak to your accountant ... ask how much will be taxed to you or your son, if any, and ask real estate lawyer how the disclosure will help or hurt his chances of getting a house.

[Blue_true]

21. Couldn't the parent co-own the house.

With the $30k and consigning for the loan being part of that? Over time, the child could buy out the parent's interest.

[Kajun Gal]

6. While we have never helped our children by that amount, we help without expecting to be

paid back....

[spanone]

7. you can gift him an amount....think it's 11K a year with minimum tax consequences

nothing illegal about it...ask your accountant

unless trump did away with it....not a tax lawyer

[former9thward]

12. Trump incrreased it to 15k a year.

$11.18 million lifetime.

[spanone]

13. thanks

[Blue_true]

22. If he lives in a state with no income tax, it is free money.

Regardless, $15k per year solves the issue at hand in 2 years.

One other way of doing it for people that can afford it is to give him $30k net with tax protection, more costly for the parents, but it gets the basic problem addressed quickly.

[pnwmom]

8. The amount you each can give without having to file a tax form is now $15,000 per year.

But no, you wouldn't be in trouble for asking your lawyer or accountant how best to structure your financial arrangement. It would be a very good idea to do so.

https://smartasset.com/retirement/gift-tax-limits

The Annual Gift Tax Exclusion
The annual gift tax exclusion is $15,000 for the 2018 tax year. (It was $14,000 for the 2017 tax year.) This is the amount of money that you can give as a gift to one person, in any given year, without having to pay any gift tax. You never have to pay taxes on gifts that are equal to or less than the annual exclusion limit.

The annual gift exclusion limit applies on a per-recipient basis. This gift tax limit isn’t a cap on the total sum of all your gifts for the year. You can make individual $15,000 gifts to as many people as you want. You just cannot gift any one recipient more than $15,000 within one year. If you’re married, you and your spouse can each gift up to $15,000 to any one recipient.

If you gift more than the exclusion to a recipient, you will need to file tax forms to disclose those gifts to the IRS. You may also have to pay taxes on it. If that’s the case, the tax rates range from 18% up to 40%. However, you won’t have to pay any taxes as long as you haven’t hit the lifetime gift tax exemption.

[rzemanfl]

9. The "giving" in quotes and "wouldn't show up as a loan" are where I can see problems developing.

Trying to make a loan look like a gift or vice-versa is not a good idea. If you need to get the money back it should be a loan. Do you have other children? Can you do/have you done the same for them? Family feuds can be created by transactions like this.

[MaryMagdaline]

10. By the way, you are a great parent!

[PoliticAverse]

14. The risk is the bill you'll get from the account or lawyer.

It'd be up to your son to properly declare any loans he had on the mortgage application.

[Flaleftist]

16. The only people who know it's a loan are you and your son.

It shouldn't matter when you 'give' money. It can be a gift to help buy the house as far as anyone who is concerned knows. He may just need to sign a statement declaring that it was a gift and not a loan.

[jberryhill]

17. No you would not get in trouble for asking the question

The entire point of attorney-client privilege is to ensure that you are able to candidly ask and receive advice.

[treestar]

19. No, not a lawyer

There is the attorney-client privilege. A lawyer advises you as to the law. They are not law enforcement and in fact, can't do anything to report what you have said to anyone else.

[brooklynite]

20. Two things to consider...

Can you ask a Lawyer or Accountant is legal? Absolutely.

Can you then act illegally and say you didn't know better? No.

[CabalPowered]

23. If there's no paperwork

It's a gift. The new tax law allows up to 11 million in gifts before you start incurring taxes. Google gift tax exclusion. The mortgage company may make you sign a doc stating that it was a gift and not a loan. That would be about it.