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How to Help Your Adult Children Buy a Home PART 2

Where will the money come from? Consider your retirement plans and the tax implications.

Use cash or near-cash funds, and non-registered funds with little or no gains or strategic losses. You can withdraw from a TFSA, as there are no tax implications. However, you lose tax-free growth on your “nest egg”. Discuss with your accountant about using your private corporation as a source. If you are considering using your RRSPs or RRIFs, remember that the withdrawals are fully taxable at the highest marginal tax rates and you may impact your retirement.

An easy but costly and risky source is your equity. If you refinance your home you may jeopardize your financial future; if the market adjusts and the value of your home goes down. When you want to retire or downsize you may not have enough for your needs.

Finally, Increase your cash flow by not paying for other things. Discuss with your child as part of the plan to help with a down payment you will stop paying for student loans, cell phone bills, car payments, insurance, rent, groceries, household supplies, etc. Negotiate a timeline so your child can have time to organize their finances. This provides time to change your mental script regarding guilt, abandonment, mean-parent, etc.

June 14th

PART 3: Should you Gift Money,

Gift Money Slowly, or Gift an Early Inheritance

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