The Ideal Gift
Many times throughout the year we are looking for the ideal gift. What if I told you I have the perfect gift, and many of you have experience with this gift. This gift is one that keeps on giving. It is a gift we can offer as a living legacy that can transcend generations and provide a hand up to future generations.
A friend of mine, Rachel told me that her mother let her know that she was leaving her an inheritance of $70,000 when she passed away. Rachel’s mom is in excellent health, and this money would not be handed down perhaps well into the future.
Rachel has a young family and is an investment real estate investor. She had run out of her own money for down payments on new properties. She had several joint venture arrangements but finding more partners was coming harder to source.
I asked Rachel if she had ever thought of having her mother gift the $70,000 now. Her mom would get to see how these funds over the years would help Rachel and her family build a healthy investment portfolio. However, Rachel’s mom was hesitant to consider Rachel’s request and thought the banks might have an issue with this.
Rachel has both her children, ages 11 and 13, help her clean their revenue properties when they had tenant turnover. The girls thought their mom and dad were in the cleaning business!
One day Rachel’s mom decided to help Rachel and the girls clean a tenant turnover. On this day, Rachel explained to the girls that the property they were cleaning belonged to their mom and dad. The tenants paid the rent, and this lease covered the cost of the ownership and each month; there was a little money left over that their mom and dad put in the bank. Rachel also explained to the girls the concepts of equity and principal pay down. Rachel told the girls the capital growth and principal pay down was their legacy.
Rachel’s mom heard the whole story and realized that she had raised her daughter to be a smart and business savvy woman who was building a business around helping her family now and in the future. With the housecleaning completed for the arrival of the new tenants, Rachel’s mom took everyone out for supper and let Rachel know she was going to gift the $70,000 to Rachel now.
Rachel promised her mom she would talk to her accountant and her bank to make sure everything was on the up-and-up.
When she met her accountant, Rachel asked:” Can momentary gifts be used to purchase real estate?” His answer was yes. Her accountant went on to tell her that each lending institution has a standard form that the money is a gift and does not need to be repaid. Make sure you do your research.
Rachel contacted one of the major banks, which has a form called a Gift Letter. The structure is straightforward to fill out. The Gift Letter is made out to the manager of the bank. It confirms the amount gifted and states who the gift is given to and the relationship to the person gifting the funds. The person can be a friend or family member.
The form has an area for the address of the property purchased. The Gift Letter states:” No part of the gift is to be provided by any Third Party having any interest (direct or indirect) in the sale of the subject property.”
The form has a section on Verification of the Existence of Gifted Funds. The structure has two options: the giftor takes the form to the bank and signs it at the bank or attaches copies of their bank book or statements of investment confirming the number of gifted funds given.
Rachel’s mom felt terrific about her decision to gift her daughter the $70,000 and is now spending more time with Rachel and her granddaughters helping to clean more tenant turnovers.
This gift turned out to give much more than just the money, creating a strong bond and living legacy for the family.