How to Buy a House for your Adult Child
As we onboard new clients, we’ve come across clients who tell us their parents send them about $20,000 a year, and have for a few years now. When we ask what it’s for, we usually we get a shrug and something vague about a tax rule, but it’s clear from the explanation that this annual gift hasn’t been fully explained to them. Behind that number is a parent who sat down with an advisor, looked at their estate, and picked a figure that lines up with the annual gift tax exclusion. Though the planning was deliberate, their child has no idea why they’re receiving this annual gift. And it’s these conversations that are on our mind whenever a parent asks us how to help an adult child buy a house.
How Mana thinks about giving while you’re alive
It’s pretty simple: If you have meaningfully more than you'll need, we think you should give some of it away now instead of holding all of it until you die. In the last eight years of running Mana, we’ve found that this stance runs against how most families we meet are planning.
Estates usually pass when the parents are in their 70s, 80s, or 90s, which means the money tends to land when the child is somewhere in their late 50s or 60s. Penn Wharton's analysis of Survey of Consumer Finances data found inheritance dollars concentrate heavily in the 56 to 75 age range. By then, the mortgage is mostly paid, the kids are grown, and the expensive decades are behind them, so the money arrives as a supplement to a life that's already built.
We've written a full breakdown of the math of inheritance, and the tax side of it favors waiting in a lot of cases. Inherited assets get a step-up in basis. Retirement accounts, brokerage accounts, and the family home are each taxed differently. If you're only optimizing for taxes, holding everything until death is often the answer.
What we're arguing for is something the tax math doesn't measure. A gift does more for your daughter when she's 34 and pregnant and looking at a house she can't quite afford by herself, and those are also the years you're most likely to still be around to watch it happen.
It's worth sitting with what you want your family life to look like over the next decade, and then looking at where your children live and why they ended up there. The answer often has more to do with what they could afford at the time than where they actually wanted to be, and plenty of adult children settle on buying a place an hour and a half out because the financial math worked. Ninety minutes of driving vs. your adult children living in a house in the same zip code as yours could easily be the difference between weekly dinners and three visits a year, so if your vision of your next decade has grandchildren close enough to turn up unannounced, helping with a down payment might be the thing that moves the needle.
Several of our older clients who themselves have adult children share a similar goal of living closer. Unfortunately, so many adult children can’t afford the places their parents live. But recently, we’ve been helping these clients find creative ways to turn their dream into reality:
A child of one client found a house they could afford only because it needed more work than anyone could live through, so our client rented them the family home at a rate that let them carry both places while the remodel dragged on.
A child of another client wanted to buy their dream house in their dream neighborhood, but had money tied up elsewhere, so our client made them a bridge loan to get to closing.
Neither move was dramatic, but in both cases, their children ended up owning the homes they wanted and needed for their growing families. Importantly, our clients were there to see it.
One rule that comes before all of this
Before any of this, your own plan has to work. It doesn’t make sense to fund a child's house if it means your long-term care plan stops working at 84. Run your own numbers before you run theirs, and once you know what you need, the leftover is the part you get to make a decision about. That's the money we're talking about for the rest of this post. If you do have the means, here are some great options to consider:
Option 1: Annual gifts, used as a teaching tool
The federal annual gift tax exclusion is $19,000 per recipient in 2026, unchanged from 2025. A married couple can give $38,000 to the same person if they elect gift splitting. If you go above that, you file Form 709 to report it. You almost certainly won't owe tax, because the excess just reduces your lifetime gift and estate tax exemption, which is $15 million per individual in 2026 under the law passed last year.
For most families reading this, the tax mechanics are the boring part, and the interesting part is what you do with the runway. If your child needs a few years of accumulated gifts to reach a down payment, use those years to tell them what the money is for, why it's arriving in installments, and how the annual exclusion works.
Bring your adult children into the wealth building and preservation conversation early. They'll appreciate it, and you'll find out a lot about how they handle money before you hand them a much larger amount.
If your child is married, you can also give to their spouse under a separate annual exclusion, which doubles the number of recipients. Whether you want to is a family question more than a tax one, and it's worth thinking through before you go down this path.
Option 2: Lend the money instead of giving it
The bridge loan example above is one version of this, and we've watched a lot of families do it well, whether that's a parent covering the gap between selling one house and closing on the next, or a parent acting as the mortgage lender outright.
An intrafamily loan works because of the Applicable Federal Rate. The AFR is the minimum interest rate the IRS requires on loans between related parties. This rate changes; it’s published monthly and set by the loan's term. It's typically well below what a bank will quote on a 30-year mortgage, which is the point.
The advantages run in both directions. Your child pays less interest than a bank would charge, and pays it to you instead of to a lender. Any appreciation in the home above the interest rate you're charging stays with them, outside your estate. From your side, an AFR loan may beat what you're earning on cash, and depending on how the loan proceeds are used, your child may be able to deduct the mortgage interest they pay you.
Here's roughly what it looks like in practice*: you lend your child $300,000 at a rate at or above the applicable AFR for that loan term, they make payments on a set schedule, and they build equity in the home without anyone filing a gift tax return, because it's a loan and not a gift.
*Hypothetical example for illustrative purposes only. Actual rates, terms, and tax outcomes will vary. This does not reflect actual results, taxes, or fees, and should not be relied upon as a recommendation.
There are two things to watch out for in an intrafamily loan. The first is charging below the AFR, which can cause the IRS to impute interest you never received. The second is letting payments slide without collecting them, since forgiven amounts can be treated as gifts you were supposed to report. Mana recommends working with an estate attorney to draft a proper promissory note, record it if it's secured by the property, and document the payments as they come in.
Option 3: Buy it together
Some of our clients who are adult children have built significant wealth on their own and want equity in the game, but still can't cover a whole purchase in a market like Los Angeles. Co-buying gives them skin in it, though how you title the property matters more than most families expect.
Joint tenancy with right of survivorship means that when one owner dies, their share passes automatically to the surviving owner. It bypasses probate, which saves time and money and keeps the transfer private, though it increases the value of the surviving owner's estate.
Tenancy in common means you and your child each own a specified percentage that can be sold or transferred separately, and each share passes according to that owner's estate plan. That gives you more flexibility, and it means your share could end up going to someone other than your co-owner.
We encourage all of our clients to put together a co-ownership agreement on paper with any real property that's co-owned. The point is to have the conversation about whose responsibility it is when something goes wrong. Put in writing:
Who pays the mortgage, property taxes, insurance, and routine maintenance
Who covers large one-off emergencies, and at what split
How equity is divided. Do you share proportionally in appreciation, or is your contribution capped at a fixed dollar amount?
What happens if your child marries, divorces, needs to relocate, or wants to sell
How the home gets valued and how one party buys out the other
Whether any upfront money was a gift, an equity investment, or a loan
Verbal agreements between people who love each other are the ones that fall apart because nobody wants to be the one who brings up money in a hard moment.
Option 4: Buy the house and put it in a trust
You can also buy the property yourself and place it in a trust with your child as beneficiary, choosing between a revocable trust that preserves your ability to change the terms and an irrevocable one that removes the property from your taxable estate and can offer asset protection.
Parents choose the irrevocable route when they want to help and still keep some control over what happens later. If your child is married, holding the home in trust can help keep the property separate from marital assets in a divorce. It can put distance between the home and future creditors or claimants.
The estate tax treatment resembles an outright gift, since you're either gifting cash to the trust to buy the home or transferring property into it. Either way the asset leaves your estate, and either way it counts against your lifetime exemption.
The catch is permanence. An irrevocable trust can't be rewritten after the fact, so the document has to spell out how the property is managed, who pays for what, and how it eventually gets distributed. Vague trust language is how siblings end up not speaking. An experienced estate planning attorney earns their fee here.
The structure matters less than the conversation
Every option above is a container, and what goes in it is your intent, which your children will understand best if you sit down and explain it to them.
If you're going to help, say what the help is: whether it's a gift or a loan, whether it's a one-time thing or the first of several, whether their siblings are getting the same and why if they aren't, and what you'd want to happen to the house if the marriage ends.
The families who handle this well are the ones who talked about it before the money moved. We've written before about how to open the estate plan conversation with your adult children, and the same approach applies here: break it into smaller conversations, start when everyone's healthy, and expect the first one to be awkward.
My own parents got an estate plan done in 2017, then we didn't revisit it as my parents aged. We ended up restating it in my dad's final weeks, when he had the least capacity to engage with it. I don't recommend that timeline to anyone.
What you get out of doing this now
You get to see it. That means the phone call from the driveway on closing day, the first Thanksgiving in a house where the oven doesn't work right and everyone eats an hour late, and the chance to watch your child do something with money you helped make possible while you're still around.
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Stephanie Bucko and Cristina Livadary are fee-only financial planners based in Los Angeles, California. Stephanie is the Chief Investment Officer and Cristina is the Chief Executive Officer at Mana Financial Life Design (FLD). Mana FLD provides comprehensive financial planning and investment management services to help clients grow and protect their wealth throughout life’s journey. Mana FLD specializes in advising ambitious professionals who seek financial knowledge and want to implement creative budgeting, savings, proactive planning and powerful investment strategies. As fee-only fiduciaries and independent financial advisors, Stephanie and Cristina never receive commission of any kind. Stephanie and Cristina are legally bound by their certifications to provide unbiased and trustworthy financial advice.