Special Paperwork Required for Money Gifted Towards Buying a Home?

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Question:

My generous parents have offered to give me $10,000 towards the purchase of my new home. Is there any special paperwork I need for this?

Answer:

Lucky you! The main paperwork you need is what’s called a “gift letter.” If you use your parents’ gift money to buy your house (not just furniture), your bank or mortgage lender will typically require written documentation from the gift giver (in this case, your parents), stating that the money is a gift, not a loan. This gift letter should specify the amount of the gift, your relationship to the gift giver, and the type of property (the exact address, if you know it) for which the money will be used. Most important, the gift letter should state that the money need not be repaid. Your lender may have a form for this purpose, or you can use Nolo’s sample gift letter form.

In terms of paperwork for your parents, they will not need to file a gift tax return because they are making a gift that is less than the amount one person can give another person each year as a tax-free gift. (The 2012 figure is $13,000, but this is indexed to go up for inflation.) In fact, your mother and father could give you a tax-free gift of $26,000 (plus $26,000 to your spouse or partner, if you have one) this year (just in case they are feeling even more generous). For more information on gift taxes, see IRS Publication 950, Introduction to Estate and Gift Taxes.

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