on parents buying their kids apartments
Comments
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This is very interesting, I'm intrigued. If you can really place a downpayment on property without a gift or transfer tax coming into play, this is a serious tax loophole. With average apartment in Manhattan now at over a $1 million, this means you can essentially gift $250K or much much more to your kids without any taxes being taken out. If you're allowed to buy them property outright, then we're talking about a loophole in the millions. What is the estate tax at this point, around 50% or so, right? That kind of massive exception doesn't seem possible. There's got to be a catch. I'll ask around and post back if I can find out the answer.
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Why Is This Girl Riding the Subway?
JAP: Oh my god, I can't wait to move into the city. I can't take my house anymore, my parents are always up my ass. Gabby, what time will you be home? Gabby, don't forget to tell Rosa to pick up your dry cleaning! Gabby, we're paying your tuition, you can't treat this house like a hotel! It's so annoying! I just wanna be on my own, I can take care of myself, I don't need them constantly doing stuff for me!
Friend: Yeah... So where were you thinking of moving?
JAP: I dunno, my dad said he might let me move into his apartment on 89th. Either that, or a partner at his firm is selling a co-op that he might buy for me. He said I can choose.
--Uptown W train
courtesy of http://www.overheardinnewyork.com/archives/007640.html -
escap wrote: This is very interesting, I'm intrigued. If you can really place a downpayment on property without a gift or transfer tax coming into play, this is a serious tax loophole. With average apartment in Manhattan now at over a $1 million, this means you can essentially gift $250K or much much more to your kids without any taxes being taken out. If you're allowed to buy them property outright, then we're talking about a loophole in the millions. What is the estate tax at this point, around 50% or so, right? That kind of massive loophole doesn't seem possible. There's got to be a catch. I'll ask around and post back if I can find out the answer.
Remember this is for an FHA mortgage - but please do let me know when you find out. I have a friend who purchased her home this way. She said her parents did not incur any fees but maybe because she paid it back right away? I did an FHA mortgage but instead of putting down 10% and borrowing money we put down 5% and financed the rest. -
Great to see we've shifted emphasis from the mundane topic of helping out kids to what's really important in life: tax minimization.
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Subject: Whats wrong with Bushwick?
What's wrong with Bushwick? Even a home there now is $600 or 700K How is it worse than other areas like East NY, Brownsville, or Flatbush.
It's close to the city, and there are all these articles about it being the next hip neighborhood.
I'm just confused as to why it has all these negative images. I don't see gangs, or guns there.
Anyone care to enlighten or agree with me? -
Subject: Re: Whats wrong with Bushwick?
Merry May wrote: It's close to the city, and there are all these articles about it being the next hip neighborhood.
I don't know specifically about Bushwick, but having lived in a "next hip neighborhood" before it exploded and became hip (Williamsburg), I remember running from a mugger, watching a guy get shot from my friend's apartment window, clearing away needles and other drug paraphenalia from my stoop in the mornings, and not having a place to get groceries or do laundry (but I had lots of space to paint). Often realtors like to push the next hip neighborhood and push housing prices up before a neighborhood is stable--not gentrified, just stable. Perhaps Bushwick is fine, I just don't always trust what I read as far as NYC real estate. -
brooklynpotter wrote: [quote=Jack Krohn]While I see nothing inherently wrong with a parent buying an apartment for a child, there is still a part of me that looks down on the child for not wanting to grow up and stand on his or her own two feet....(snip)
i think that you're assuming that all parents who help their children buy homes are doing so because their child doesn't want to grow up; that's a pretty major assumption.
there are tons of good and lousy reasons why adults, young and old, have $$ or not. not being able to "grow up" is merely one of them
I agree that having little money does not mean you are not willing to grow up. A lot of people make choices in life that mean they make less money than they would have otherwise (myself included).
But making choices that mean you will make little money, and not being willing to accept the consequences of those choices--to me, that does count as not growing up.
Again, I don't think it's wrong for parents to give kids money for homes. But I also think it's not something that parents owe to their adult kids, or that their adult kids should feel is owed to them--because society doesn't value what they do enough, or whatever. I know people who complain that their parents should give them some of their inheritance now, rather than sitting on it all until they die--that kind of attitude I can't respect. If that's what Jack means by "not wanting to grow up," then I agree with him.
But sorry to go off topic. Please all, continue your discussions of estate-tax shelters. -
linusvanpelt wrote: But I also think it's not something that parents owe to their adult kids, or that their adult kids should feel is owed to them--because society doesn't value what they do enough, or whatever. I know people who complain that their parents should give them some of their inheritance now, rather than sitting on it all until they die--that kind of attitude I can't respect.
I would totally agree with you if one median income bought as much home in 2006 as in 1966, and if to obtain that median income, you needed the same number of years of education.
But I can't respect the attitude of a generation that sailed through on the greatest wealth redistribution ever and now would rather spend it on a new Porsche to get to the golf course than on helping build the kind of stability into the lives of their children that they received on the cheap and took for granted, but which is now all but out of reach of the young. -
doctorj wrote: But I can't respect the attitude of a generation that sailed through on the greatest wealth redistribution ever and now would rather spend it on a new Porsche to get to the golf course than on helping build the kind of stability into the lives of their children that they received on the cheap and took for granted, but which is now all but out of reach of the young..
I find that hard to believe? A greater distribution then the Gilded Age??
And frankly, they did earn that money and can do with it what they want--which in many cases will be to pay for care in their old age--(it is also the generation with the longest life expectancy in history).
And my parents for example, bought their homes in middle class neighborhoods and traded up slowly. They didn't just jump right into one of the wealthiest neighborhoods in the country--i.e. Park Slope as their first purchase. Maybe if more middle class "kids" bought in marginal neighborhoods it would stabilize those neighborhoods or revitalize other cities. (Now of course, in the past 8-10 years, I am not sure if that is possible in NEW YORK) But is that the baby boomer's fault or just the greed of real estate (me too, I was happy to cash in my profits). -
kensingtonmom wrote: And my parents for example, bought their homes in middle class neighborhoods and traded up slowly. They didn't just jump right into one of the wealthiest neighborhoods in the country--i.e. Park Slope as their first purchase. ...
And if they did buy in Park Slope in 1966 or 1976, they would not exactly have been buying into the yuppie paradise it is today.
I do agree doctorj has a point... for a period after World War II things were in many ways easier for the single-income family than today, for many social and economic reasons I am not smart enough to summarize (but not limited to increases in housing prices).
Then again, my generation didn't have the draft or childhood polio either, so you win some, you lose some. -
linusvanpelt wrote: I do agree doctorj has a point... for a period after World War II things were in many ways easier for the single-income family than today, for many social and economic reasons I am not smart enough to summarize (but not limited to increases in housing prices).
I agree that the division between the rich and poor is growing and the middle class is being squeezed--so it is harder for a first time buyer now. (Although 12 years ago my husband and I did manage to save for a downpayment on a coop and both of us were artists and working crap jobs). But after WWII that generation did SAVE their money. People were not maxed out on credit cards--they just did without, or waited for sales, or repaired things like shoes and socks or small appliances. Eating out was a luxury not a necessity. Can you imagine darning a pair of socks today? I wouldn't know how to. So although I think the economy is changing to favor the wealthy, I also think that we are a shopahaulic culture and this seems to have grown exponentially with internet shopping and home equity loans! -
The greatest redistribution of wealth in history is actually scheduled to take place in the near future, as the baby boomers retire and begin to collect social security. Vast sums are about to be transferred from the working young to the retired elderly, so I guess in light of that perhaps if the old folks throw us a down payment or two we've got it coming to us.
Separately, I think linusvanpelt makes a great point. It's certainly the case that you can make a legitimate choice to pursue a low-paying career for a host of good reasons; however, once you've made that choice I'm not sure that it's fair to expect to be subsidized by others. And doctorj, I'm not really clear on how the macro, transgenerational issues that you're raising have anything to do with the relatively simple question over whether buying your kid a house constitutes spoiling them.
The fairest answer is probably that it depends on the nature of the individual relationships in question, I suppose. -
escap wrote:
Merely that from my point of view, the post-war generation seems to have been spoilt at every turn, on the sweat of their parents' and children's generations. From reasonably cheap housing and reasonably secure jobs, often with reasonably generous fixed pensions after reasonably short educations, through to the massive impending social security windfall you mentioned. And specifically, their generation's outsized capital gain in real estate is my generation's outsized debt, to be recouped upon their death if not before. For them to worry about whether helping their kids in their 30s get a start constitutes spoling, when they had relatively little trouble by today's standards buying into the market in their 20s, often on one not two incomes, seems like the pot calling the kettle black to me.
And doctorj, I'm not really clear on how the macro, transgenerational issues that you're raising have anything to do with the relatively simple question over whether buying your kid a house constitutes spoiling them.
The equation is different if we're talking about the kids of older GenXers, who came a little too late to ride the crest of the wave; if the two generations have encountered similar playing fields, then it's more reasonable to consider whether this kind of assistance constitutes spoiling. -
Ah, in that case I do see your point. Obviously a bit of a generalization but certainly the baby boomer generation should be thankful of what they've had.
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escap wrote: Ah, in that case I do see your point. Obviously a bit of a generalization but certainly the baby boomer generation should be thankful of what they've had.
Yes but were they spoiled or did they have some of the things we want? Job security, to be cared for in their old age, health insurance and the ability to buy a home? Instead of being all pissed off at them for having those things (which their parents and grandparents helped secure through hard work, unions etc), why can't we fight for those certain basic rights instead of whining that that generation owes us our first homes. To me, that sounds even more spoiled. -
kensingtonmom wrote: [quote=escap]Ah, in that case I do see your point. Obviously a bit of a generalization but certainly the baby boomer generation should be thankful of what they've had.
Yes but were they spoiled or did they have some of the things we want? Job security, to be cared for in their old age, health insurance and the ability to buy a home? Instead of being all pissed off at them for having those things (which their parents and grandparents helped secure through hard work, unions etc), why can't we fight for those certain basic rights instead of whining that that generation owes us our first homes. To me, that sounds even more spoiled.
Please locate the word "spoiled" in my post. I said they were lucky and should be thankful, much as you might say, "Be thankful that you live in a free, prosperous, secure society." I'm not sure which part of that expression is accusatory or "all pissed off".
I do think that the magnitude of the wealth transfer about to take place from young people to poor people will have serious detrimental effects on our society, and I am frustrated with elderly voters who are opposing en masse any attempt to allow for the evolution of retirement security into a more progressive structure that accounts for the demographic and budgetary changes since they were my age; but this is a completely different point and is essentially unrelated to buying houses for kids.
Like I've said before, that decision and its merits rest on the individual people involved; in general, I'm skeptical of gifts and think loans might be an interesting alternative, but ideally family pays and repays each other a million times over, so there are no gifts that go unearned. That is the ideal, however; the reality is that there are tons of spoiled people out there (at least IMO), both rich and poor, and so I'd personally try to err on the other side. -
first things first: you can now give 11k a year.
second, my feeling: if you haven't learned the value of $$ and how not to be spoiled and how not to feel you're owed things by the time you're old enough to buy a home, then the people who raised you liked did a lousy job.
unless you're just a jerk whose parents had good values but they somehow didn't get passed on.
that said, back to the original point: if you're a parent, why not help your kids out? regardless of their own morals, you are their parents. a 1.4 mil. condo in bburg is one thing, a one bedroom in windsor terrace is quite another. -
escap wrote: Please locate the word "spoiled" in my post. I said they were lucky and should be thankful, much as you might say, "Be thankful that you live in a free, prosperous, secure society." I'm not sure which part of that expression is accusatory or "all pissed off"..
Relax....I picked up the wrong part of DoctorJ's post which yours was embedded within in which he rants about how spoiled the baby boomers are!
I personally don't want my retirement based on the market economy. I have made a lot in the stock market and lost just as much. Although social security is not the most progressive system--it is a safety net and that is what I think we need as a society. While you may think your parents owe you a new coop, I think we owe them social security in their old age. -
kensingtonmom wrote:
Some of what our parents have was won through the saving and hard work of our grandparents. The rest was won by handing our generation the bill. It's a bit late for us to demand that our children pay for us, and they're also helping pay for our parents, but if we fought hard, we might be just able to force our grandkids to pay for our children. I'm a leftie, but I'd rather the burden of care for the young, old, poor, and infirm were more evenly distributed generation by generation.
Yes but were they spoiled or did they have some of the things we want? Job security, to be cared for in their old age, health insurance and the ability to buy a home? Instead of being all pissed off at them for having those things (which their parents and grandparents helped secure through hard work, unions etc), why can't we fight for those certain basic rights instead of whining that that generation owes us our first homes. To me, that sounds even more spoiled.
My perspective about home ownership is colored by personal circumstances. My father, an orphan, took a short mediocre education and bought a nice house in a nice neighborhood on one income on a middle-class salary in the public sector. I took a much longer and better education, made a lot of sacrifices, and at a decade older than him and on a much better salary vs. median in the private sector, have bought my own place a fraction of the size and quality. My brother also took a longer education but made fewer radical sacrifices, and he and his partner with two public sector wages cannot afford to buy. They're paying part of his health insurance and pension through the tax system in that country, while he's sitting on millions in equity he happened to fall into, and saying that if he did it himself, so should they. He lives in incredible luxury and they live in a beat-up rental. A discussion about whether my father helping my brother get a place of his own constitutes spoling makes no sense without taking a look at where the wealth actually came from and who is really paying for whom. -
kensingtonmom wrote:
That's unfortunate, since it most likely is. State and corporate pension funds are all invested in the capital markets. Combine that with savings in mutual funds, 401k's, IRA's, and real estate, and your avg American has the vast majority of his/her retirement wrapped up in the markets, for better or for worse. Beyond that, even social security is essentially based on the market economy, since its revenues rise and fall with the business cycle. If our capital markets were to sustain a cataclysmic crash, our economy as a whole would certainly too, which would mean social security would be in jeopardy as well.
I personally don't want my retirement based on the market economy.
I never suggested privatizing soc security anyway. However, the current system is such that more $$ goes out than goes in. In order to balance it, you have to raise taxes on the younger generation, but if the population continues to rise and people continue to live longer lives, you'll have to tax the next generation even more, and so on, and so on. SS taxes have thus risen dramatically since the program was first rolled out, and will likely continue to rise. Furthermore, the govt has a terrible habit of spending the $$ it's supposed to have stored away for us. All of this results in a Ponzi scheme that is pretty scary to me.kensingtonmom wrote: While you may think your parents owe you a new coop, I think we owe them social security in their old age.
I think I've been pretty clear about my skepticism towards the idea of parents buying kids a new coop, so perhaps this is also not directed at me? I absolutely agree that younger generations should take care of their elders. I'm not in favor of taxing poor people to fund Donald Trump's completely unnecessary social security payments, but I certainly hope to take care of my own parents, and I absolutely want to see the elderly poor cared for properly. In fact, call me crazy, but I think one great way to make sure that the next elderly generation isn't out on the streets is to reform social security so that it's not bankrupt by then. -
escap wrote: I absolutely agree that younger generations should take care of their elders. I'm not in favor of taxing poor people to fund Donald Trump's completely unnecessary social security payments, but I certainly hope to take care of my own parents, and I absolutely want to see the elderly poor cared for properly. In fact, call me crazy, but I think one great way to make sure that the next elderly generation isn't out on the streets is to reform social security so that it's not bankrupt by then..
I misinterpreted what you said. When I hear social security reform--it is often people wanting to privatize it--which I think is scary. Reform? Sounds fine with me as long as some form of government safety net is in place. But now we are really off the topic of parents buying their kids their first homes!! -
Subject: And there went the neighborhood...
Not everyone who is bestowed with a gift-wrapped apartment from Daddy is irresponsible or arrogant but, unfortunately, we have seen what a few bad apples can do. To wit:
1) The first-timers who aren't quite mature and who treat their place like a flop joint, "blessing" their neighbors with plumbing disasters, roaches and the drunken caterwauling of bad pop songs at 4 a.m.
2) The arrogant snobs who take care of their apartments but who spoil a decades-old sense of community in a wonderful neighborhood with their sense of entitlement and their shallow, ticky-tacky values.
3) The splinter group from category two, the wealthy young parents whose bratty spawn run roughshod over neighbors in the street without a word of admonishment from Mom and Dad.
Of course, there are a lot of nice people in Park Slope whose parents were not only generous but who managed to instill a sense of responsibility, courtesy and decency in their progeny. -
kensingtonmom wrote:
I think the key is: benefits that rise with the cost of living = good. Benefits that rise (and maybe fall) with the median wage = bad. Private cronies profiteering from redistribution of wealth when a public system can be made to work better than extremely inefficiently = bad. Benefits going to anyone who could live without them = bad. Pay-as-you-go = good. Sending the bill further and further into the future with interest, at the same time as my generation is indebted for the extra equity in the homes of the elderly = bad.
I misinterpreted what you said. When I hear social security reform--it is often people wanting to privatize it--which I think is scary. Reform? Sounds fine with me as long as some form of government safety net is in place. -
doctorj wrote: [quote=kensingtonmom]
I think the key is: benefits that rise with the cost of living = good. Benefits that rise (and maybe fall) with the median wage = bad. Private cronies profiteering from redistribution of wealth when a public system can be made to work better than extremely inefficiently = bad. Benefits going to anyone who could live without them = bad. Pay-as-you-go = good. Sending the bill further and further into the future with interest, at the same time as my generation is indebted for the extra equity in the homes of the elderly = bad.
I misinterpreted what you said. When I hear social security reform--it is often people wanting to privatize it--which I think is scary. Reform? Sounds fine with me as long as some form of government safety net is in place.
I pretty much agree with you, although I'd note that two of your points might contradict. Namely, benefits that rise with the cost of living might also result in the bill being sent further down the road with interest. A few facts: when the program first rolled out there were 16 workers per retiree; today there are just 3, and by the time the baby boomers are in full collection mode there will be just 2 workers per retiree. Concurrent with this change, soc sec taxes have gone from just 2% in 1950 to 12.4% today. All predictions point to further future increases, and big ones at that. Furthermore, people are living longer than they did in 1950, and therefore collecting much more (and we haven't even mentioned healthcare!).
What I'd like to see is a system that is sustainable, not one that just keeps growing and growing and growing. The only way that I can see to make this happen is to progressively reduce benefits from the top income levels on down, and push the retirement age up a few years. Second, policies should be put in place to help encourage, or even mandate, that people save appropriately for their retirement. Studies have shown that even when companies offer FREE matching funds into 401k plans, people still neglect to contribute, which is essentially the same thing as turning away hundreds of thousands of $$ of compounded salary.
There's no need to "privatize" social security, since there is already a huge, sophisticated and highly developed private retirement system that makes up the vast majority of Americans' retirement security. The public system is, as kensingtonmom said, a safety net, and it should continue to play that role--essentially a social welfare system for the elderly poor. For the middle and upper class, the right thing to do is to save more all along, not to soak the young (who live in a more competitive age as it is) at ever increasing rates to fund 20 years of golden age leisure. -
BTW, sorry about hijacking this thread, but it seems to have died down anyway so I figured it was fair game.
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escap wrote: For the middle and upper class, the right thing to do is to save more all along, not to soak the young (who live in a more competitive age as it is) at ever increasing rates to fund 20 years of golden age leisure.
As someone who is middle-class with children, I really don't have a lot of extra cash to sock away towards retirement. That is just the reality of having kids in an expensive city and the reality of choosing a profession that I enjoy and is not a huge money maker. I think you are right, there should be more incentives to take advantage of 401Ks when they are offered through work (although my husband's has continually LOST money these past few years and let's not forget Enron). But one of the merits of social security is that it is a benefit most people pay into and not a welfare program. Perhaps it just needs to be a sliding scale? But of all the things the government "wastes" my money on, social security is the least of my worries. At least that is something that benefits our society and makes some actual SENSE to me. I read that in before the turn of the century, people (who were not wealthy) usually just dropped dead on the job. They worked until they could work no longer (most people worked hard manual labor). We definitely want people to have a retirement and I think everyone who works should have that right. Wow, this is totaly off topic soon it will be bumped into one of those new forums that i never check! -
kensingtonmom wrote: As someone who is middle-class with children, I really don't have a lot of extra cash to sock away towards retirement. That is just the reality of having kids in an expensive city and the reality of choosing a profession that I enjoy and is not a huge money maker.
Then I assume you would not appreciate a 10% raise in your taxes, no?I think you are right, there should be more incentives to take advantage of 401Ks when they are offered through work (although my husband's has continually LOST money these past few years and let's not forget Enron).
Anyone over 50 who has their retirement savings in stock is playing Russian Roulette. There are a gazillion other investment instruments out there, however, which are far safer and are arguably even safer than social security itself. The Supreme Court has held that soc sec payments are not a legal obligation; on the other hand, corporate and government bonds most definitely are.
Also, if your husband has lost money in the stock market these past few years he needs to hire a new broker. The Dow is at an all-time high and the market in general has soared.But one of the merits of social security is that it is a benefit most people pay into and not a welfare program.
Actually, it is in fact a welfare program. The money paid is not invested or saved in an account somewhere, but simply redistributed exactly in the same form as welfare. Furthermore, welfare itself is also a benefit that all taxpayers pay into.Perhaps it just needs to be a sliding scale? But of all the things the government "wastes" my money on, social security is the least of my worries. At least that is something that benefits our society and makes some actual SENSE to me.
Sliding scale is a good idea, as is banning the practice of spending surplus collections on non-social security expenses. If the govt had simply taken all the surplus funds and put it in a box somewhere, we wouldn't have nearly the solvency crisis that we have.
I don't think that the program is a waste, I just think it's too expensive. As far as it prevents the nightmare scenarios that you described of people dropping dead on the job, it is a critical part of our social safety net. To the extent that it funds Donald Trump, however, it is clearly a waste. Talk of reform should therefore not trigger the kind of knee-jerk hysteria that it has. Liberal Democrats need to join the effort for reform; otherwise, reform will be in the hands of conservative Republicans, and we definitely don't want that to happen. -
escap wrote: If the govt had simply taken all the surplus funds and put it in a box somewhere, we wouldn't have nearly the solvency crisis that we have.
You mean like the Al Gore "lockbox" that everyone mocked relentlessly at the time? -
Carnivore wrote: [quote=escap]If the govt had simply taken all the surplus funds and put it in a box somewhere, we wouldn't have nearly the solvency crisis that we have.
You mean like the Al Gore "lockbox" that everyone mocked relentlessly at the time?
I assume it was primarily republicans who mocked it, not everyone, no? I'm not familiar with the details of Gore's plan, but if he wanted to prevent using surplus social security funds to fund unrelated govt expenses, then that was right on. The irony is that both parties agree with this idea in theory (dems want to invest the $ themselves and reps want to give it back under the condition that it gets invested), but they'll never actually do it b/c then how would they pay for all the other promises they've made?? There's only one way to do that: shift costs to the next generation. Truly brilliant.
To get back on topic, we are all going to owe our children and grandchildren a house and more, after all the massive debt, environmental destruction and god knows what else that we are dumping on them. ](*,) -
escap wrote: I assume it was primarily republicans who mocked it, not everyone, no? I'm not familiar with the details of Gore's plan, but if he wanted to prevent using surplus social security funds to fund unrelated govt expenses, then that was right on.
Well, SNL got in on the act...
http://www.geocities.com/CollegePark/6174/jokes/2000-prez-debate-transcript-1st-snl-debate.htm
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