High-Net-Worth Strategies for Funding Your Child’s Home Purchase

As the path to first-time homeownership grows more difficult for younger generations, or when children reach a point when their lifestyle calls for the purchase of a larger home or a move to a new location, many high-net-worth parents are stepping in to help support their children in buying the home that’s right for them. A recent survey indicates that as many as 37% of respondents in the U.S. purchased their home with financial support from parents or grandparents.¹ With home prices near all-time highs and average 30-year fixed mortgage rates above 6% since the third quarter of 2022², more families are choosing to celebrate significant milestones, such as graduations, weddings, or the birth of a grandchild, by assisting their children with financial support for a home purchase.

For high-net-worth parents, there is a range of options to provide financial support, each with its own considerations, degree of control, and potential impact on family relationships. Families can offer direct support by giving cash or distributing assets from a trust. Some parents may extend an intrafamily loan. Other parents may prefer a more hands-on approach, such as purchasing the home for their child through a trust or establishing co-ownership.

If your goal is to support the lifestyle you wish for your children and grandchildren today, there are multiple options for providing financial support for your adult children to purchase a home. The best strategy or combination of options for you and your family will depend on your unique needs and situation.

Giving cash to help with a home purchase

Funding a down payment could reduce your child’s monthly mortgage expenses by reducing the home loan amount or eliminating the need for private mortgage insurance (PMI). If you gift enough cash for your child to make a cash offer for the total purchase price of the home or property, the all-cash offer may strengthen your child’s position in a competitive housing market by allowing your child to close faster and stand out to sellers by removing the need for financing. Enabling your child to purchase a home outright also negates the need for your child to make monthly mortgage payments, which can significantly reduce their overall housing costs and may free up their funds for other purposes, including savings, investments, or other lifestyle priorities.

Gifting cash to help with a down payment or make a cash offer is straightforward, but potential federal gift and estate tax consequences should be assessed and considered. Any gift over the annual gift tax exclusion amount, which is $19,000 for individuals and $38,000 for gifts from married couples given to an individual in 2025, is considered a taxable gift. Taxable gifts either use some of the donor’s lifetime gift and estate tax exemption or are taxed at a top rate of 40% if the lifetime exemption has already been exhausted. In 2025, the lifetime gift and estate tax exemption amount is $13.99 million for individuals and $27.98 million for married couples. With the passage of the One Big Beautiful Bill Act (OBBBA), the federal lifetime estate and gift tax exemption will increase to $15 million per individual starting in 2026, avoiding the scheduled sunset that would have significantly reduced the exemption amount from $13.99 million in 2025 to $5 million per individual in 2026, as adjusted for inflation.

This means that taxable gifts given during your lifetime and the fair market value of assets included in your estate at death can potentially be transferred tax-free up to the exemption amount. While making a cash gift to help with a home purchase can be a strategic way to use a portion of your lifetime exemption and potentially lower future estate taxes, consider how doing so may affect your overall estate plan.

Before offering cash support, consider whether your assistance is intended to be a gift or a loan. If you choose to gift cash, open communication will be key to aligning on intentions for use of the funds. Your child will have full discretion over how the funds are used, including the option to use the money for something other than a home or to sell the home after purchase. To avoid misunderstandings, it is important to clearly express any expectations you have about how the funds should be used or how long the home should be kept.

Assisting with your child’s mortgage

Having your child take out a mortgage in their name, even if you plan to provide financial support, can have its own benefits for both you and your child. If you intend to liquidate investments, helping with a down payment rather than providing the full purchase amount means you may be able to sell fewer assets and potentially incur less capital gains tax. With your child as the borrower on the mortgage and making regular payments, this arrangement can also help build or bolster their credit history. If the mortgage is the first, most significant, liability your adult child has taken on, the fiscal responsibility to budget for and make payments on time can help grow your child’s financial planning experience with a direct, tangible benefit.

When you are helping with your child’s down payment, you may want to have two important documents ready in advance of the mortgage application. First, you may want to prepare a gift letter in advance that clearly states the amount of your gift. Additionally, lenders may ask for two recent account statements from the account where the funds originated³. If you prefer not to disclose the full extent of your assets to your child, you may want to approach the transaction carefully.

If you would like to provide ongoing assistance with your child’s mortgage payments, an existing trust, or a new trust established specifically for this purpose, may be able to make monthly distributions to your child to partially or fully offset mortgage expenses. For example, if your child’s current monthly rent or monthly mortgage payment is $3,000, and their new monthly mortgage payment is $5,000, the trust could potentially distribute the $2,000 difference each month to bridge the additional housing expense.

Working with a wealth management team that includes your private banker can help you navigate privacy considerations, integrate trust strategies for ongoing support, and align the transaction with your broader balance sheet.

Making an intrafamily loan to your child

An intrafamily loan may provide your child with a lower interest rate than if your child obtained a mortgage from a financial institution, and can eliminate the need to meet traditional mortgage credit requirements.

To ensure the loan is not viewed by the IRS as a taxable gift, the IRS generally requires a written loan agreement that includes the loan terms, a fixed repayment schedule, and a minimum interest rate. If these conditions are not met, the IRS may treat the loan as a taxable gift, which could consume some of the parent lender’s available lifetime estate and gift tax exemption or trigger gift taxes if the exemption has already been used.

Intrafamily loans must have a minimum interest rate equal to or above the applicable federal rate (AFR), which is set and updated monthly by the IRS. Typically, the parent lender must report interest received as taxable income in the year it is collected.

If the child borrower fails to make payments and the loan is later forgiven by the parent, any amount over the annual gift tax exclusion in a given year will be considered a taxable gift. Forgiven amounts or improperly documented loans can increase the parent lender’s gift or estate tax liability. Some parents choose to forgive part of the loan principal or interest gradually over time by strategically keeping forgiven amounts under the annual gift tax exclusion. This approach can reduce the parent lender’s taxable estate in an effort to minimize federal estate taxes while avoiding gift tax exposure.

Family dynamics are also important when considering an intrafamily loan as a lending strategy. Families with multiple children may want to ensure that support to each child is fair, which can be difficult if the cost of living across different geographies varies significantly. Having to collect missed payments can strain relationships between you and your children. However, when there is appropriate communication between parents and children, and if children follow through as agreed upon and expected, an intrafamily loan can serve as a valuable financing strategy to support a home purchase for your child’s family while preserving generational wealth.

Purchasing a home in trust for the benefit of a child

Establishing a trust for the purpose of acquiring and holding property for the benefit of your child and their family allows you to provide direction over the use of the property and when ownership may eventually be transferred through the terms of the trust. Some families use an irrevocable trust to remove the property from their taxable estate, thereby promoting federal estate tax efficiency. Depending on your state’s law and the terms of the trust document, placing the home in a properly structured irrevocable trust may help shield the property from future creditors or help protect against a potential divorce claim, so the property remains within the family and is not otherwise vulnerable to claims that might arise if the home were owned outright.

For irrevocable trusts, the gift and estate tax implications are similar to gifting cash or making other taxable gifts. Transferring the property to an irrevocable trust can remove the value of the home and any future appreciation from your taxable estate. If you have sufficient lifetime gift and estate tax exemption remaining, the transfer can be made without incurring gift taxes and may help reduce estate taxes at death.

Further, placing a home in an irrevocable trust typically requires the original owner to give up control and ownership of the asset. The terms of the trust will then determine who may live in the home, how associated expenses are paid, and what happens to the property at the beneficiary’s death or trust termination. Note that the terms of an irrevocable trust can often be difficult to amend once the trust is established.

Once the trust holds title to the property, the home is managed by a trustee according to the terms of the trust document. It is important to ensure the trust has enough liquidity to pay ongoing expenses, such as, but not limited to, property taxes, insurance, and maintenance costs. These expenses are typically paid from funds held in the trust or through contributions made by the grantor or beneficiary, depending on how the trust is structured. Instructions for the property’s management, such as shared use, expenses, improvements, or future sale of the property, may be formalized in the trust document.

If the home is purchased using a mortgage rather than outright with cash, additional considerations may apply. Many lenders require an individual to personally guarantee the loan, meaning the trustee or another party must agree to be personally responsible for repaying the loan if the trust fails to make payments.

Purchasing a home in trust for the benefit of your child also involves unique administrative complexities for the trustee. This may include overseeing the property or related loans, ensuring that property taxes and insurance premiums are paid, and filing annual tax returns. Using a professional corporate trustee or co-trustee can help ensure the trust is administered in compliance with applicable laws and fiduciary standards. It is also important to consult with an estate planning attorney in conjunction with your private wealth management team to ensure the trust document is properly drafted to maintain the ownership and long-term management of the property.

Co-owning the home with your child

Co-owning a home, where both the parent and child are listed on the title, is another way to assist with a home purchase that allows parents to retain partial ownership over the property if they desire. This approach can offer a degree of control over how the property is managed, but it also introduces its own set of complexities to consider. Deciding who will cover maintenance and shared expenses, as well as making decisions about selling the home, can be complicated, especially when parents and children have different priorities or expectations.

When considering co-ownership, one of the key decisions that will need to be made is how to structure ownership. Two common forms of legal ownership are joint tenancy and tenancy in common, which each bring their own set of implications if either the parent or child co-owner passes away.

Joint tenancy includes the right of survivorship, meaning that if one co-owner passes away, their share automatically transfers to the surviving co-owner. This generally bypasses probate, the process of settling a person’s estate through a court proceeding and distributing assets to the beneficiaries of the estate, which can be time-consuming and costly. By avoiding probate, the transfer may also preserve privacy, as probate proceedings become public record.

By contrast, tenancy in common allows the deceased parent or child’s ownership interest to pass to beneficiaries as outlined in each person’s respective estate plan, which may result in the ownership interest being transferred to someone other than a surviving co-owner.

An additional note of caution if considering co-owning a home with your child is that you may be exposed to personal liability because your name is on the title of the home. If your child misses mortgage payments, fails to pay property taxes, or faces a lawsuit, creditors or tax authorities could pursue you for funds or taxes owed as a co-owner. Additionally, if your married child divorces, the divorce may complicate the ownership arrangement, particularly if the child’s spouse has a legal interest in the property. It is important to carefully weigh these potential drawbacks and evaluate how co-ownership could impact your broader family dynamics.

Engage your private wealth management team

Helping your child finance a home purchase, whether they are a first-time homeowner, or their family is moving into a house that offers greater comfort and space, may be one of the most impactful ways to share your generosity with your children today.

At Commerce Trust, your private wealth management team includes professionals in estate and financial planning, real estate management, private banking, tax management^*, trust administration, and investment portfolio management specialists who can help your family explore a range of planning and banking options to support your child’s home purchase. Our specialists will consult with you on potential strategies, assessing the impact on your finances and ensuring your approach aligns with your financial goals. When a trust is involved, if engaged to do so, we can provide professional corporate trustee services to help oversee property administration and maintain tax and legal compliance.

Contact Commerce Trust today to learn how we can help you with home purchase strategies to support your children and grandchildren in experiencing the lifestyle you want the next generations of your family to enjoy.

1 https://www.comparethemarket.com.au/home-loans/features/intergenerational-wealth-help/ 

2 https://fred.stlouisfed.org/series/MORTGAGE30US 

3 https://selling-guide.fanniemae.com/sel/b3-4.3-04/personal-gifts

^*Commerce does not provide tax advice to customers unless engaged to do so.

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