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Gifts with strings attached

“Yeah I’d give it to him,” Ramsey confirmed after listening to the caller speak highly of his son. “But I’d put some terms on it.”

Parents who offer early inheritances or large cash gifts to their adult kids is hardly unusual. According to a poll conducted by YouGov, 79% of first-time homebuyers —between the ages of 18 and 29 — had some financial assistance for down payments from their parents.

In general, 65% of parents admitted to providing some sort of financial assistance to their adult kids between the ages of 22 and 40, according to a USA Today study.

As of 2024, the federal lifetime gift and estate tax exemption amount is $13.61 million per person, so transferring a property to your adult child as a gift should have minimal tax consequences depending on the property’s market value.

Such a transfer could be a game-changer for young adults. The ongoing housing crisis has made homeownership unattainable for many young Americans who are just getting their careers started or are trying to raise a family. The gift of a house — or enough money to cover a down payment — could be a serious advantage in this environment.

“He’s setting his son up for life by doing this,” wrote one viewer on Ramsey’s YouTube video.

“I wish more parents understood what this means for kids today,” wrote another.

However, Ramsey insisted that such a gift needs to have some strings attached. “I would put some terms on it,” he said, suggesting that the caller’s son should have solid plans for his life beyond owning a home.

Ramsey also recommended that the caller’s son consider any maintenance or renovations the property may need in the future and to have money set aside for that.

The biggest caveat, though, in Ramsey’s eyes, is that the son had to promise his dad that he would “never borrow any money” down the road. These conditions could help limit the risk that this inheritance will be squandered by the young adult.

Many young Americans could be poised to receive similar gifts — without any guardrails — in the coming years.

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The great wealth transfer

As the baby boomer generation ages, younger generations could be in line for a massive influx of wealth. Assets collectively worth $84 trillion could change hands within the next 20 years, according to estimates from Cerulli Associates.

Many of these assets are likely real estate, with Freddie Mac estimating a “silver tsunami” of nine million homes coming to market over the next decade.

It’s a situation that experts say could reset a historic divide when it comes to personal finance and homeownership for younger generations. As a result, millennials, in particular, will benefit the most, offering them opportunities to buy property, pay off student debt, invest and travel, according to Forbes.

Those who receive an early inheritance, passed down by their parents during their lifetime — like the caller’s son — are some of the first beneficiaries of this "great wealth transfer". It’s expected to make millennials the richest generation in American history.

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Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.

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