Q: My spouse and I are helping one of our children purchase a home by contributing toward the down payment. We have other children as well. Is there anything we should consider from an estate planning perspective?
A: As home prices continue to rise, many parents are helping their adult children purchase their first homes. For some, that means helping with a down payment. Others contribute toward closing costs or provide a larger sum to make the purchase possible. While the focus is often on getting to the closing table, many parents do not realize that this type of financial assistance can have estate planning implications.
One of the first things to consider is how you want that contribution to be treated. Should the contribution be a gift or a loan? Or do you intend for it to count toward that child's inheritance? There is no right or wrong answer. The important thing is making sure your estate plan reflects your wishes.
Parents often say they want to treat their children equally but may not fully consider how lifetime financial assistance affects that goal. If one child received substantial help during life and the estate plan later divides the remaining estate equally, the overall result may not feel equal to the other children. Some parents are comfortable with that result. Others want the prior assistance to be considered when the estate is divided. Either approach is acceptable, but the Will or Trust should clearly state how those lifetime transfers are to be treated.
The same issue arises if the financial assistance was intended to be a loan. If the loan remains unpaid at the time of your death, your Executor or Trustee may have a duty to collect it as an asset of your estate. On the other hand, if your intention is for the loan to be forgiven, or for the unpaid balance to be deducted from that child's share of your estate, your estate planning documents should clearly reflect that intent.
These situations often become more complicated over time. Years later, it is not uncommon for family members to remember these transactions differently. One child may believe the money was a gift, while another believes it should be considered when the estate is divided. Addressing these issues in your estate plan gives your executor or trustee clear guidance when administering your estate.
The choice to gift can also have direct gift and estate tax consequences. In 2026, an individual may give up to $19,000 to any one recipient (or $38,000 for a married couple) without needing to file a gift tax return. A larger down payment contribution will typically require filing IRS Form 709, though it will usually just reduce your lifetime gift and estate tax exemption, currently $15 million per individual, rather than trigger an actual tax bill.
For clients whose estate is large enough to be subject to estate tax, this kind of gift can also be a useful planning tool. Money given now, along with any future growth on it, is removed from your taxable estate, while amounts above the annual exclusion simply use up part of your lifetime exemption rather than being taxed twice. Keeping clear records of how the contribution was structured helps ensure it is reported correctly and treated consistently with your broader estate plan.
Estate planning is about more than deciding who inherits your assets. It is also an opportunity to coordinate significant lifetime gifts and financial assistance with your overall estate plan. If you have recently helped a child purchase a home, or are considering doing so, it is be a good time to review your estate plan with your estate planning attorney to ensure any past and future gifts and loans are properly accounted for.
Circular 230 Disclosure Notice: To ensure compliance with Treasury Dept. rules governing tax practice, we inform you that any advice contained herein (including in any attachment) (1) was not written and is not intended to be used for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.
Alma Muharemovic, Esq. and Michal Lipshitz, Esq.
Alma Muharemovic, Esq. is an Associate Attorney at Burner Prudenti Law, P.C., focusing her practice on Estate Planning. Michal Lipshitz, Esq. is a Senior Associate Attorney at Burner Prudenti Law, P.C., focusing her practice on Estate Planning and Elder Law.
Burner Prudenti Law, P.C. serves clients from New York City to the East End of Long Island with offices located throughout the region.