The Bank of Mom and Dad needs a process

Nearly a quarter of first-time buyers used a gift or loan from family for their down payment in 2025, according to the National Association of Realtors, and inside estate-planning meetings that figure has taken on a second life. Giving while living is gaining ground, and advisors across price points hear variations of the same question: should the parents help buy the house? InvestmentNews reports the shift in a new look at the practice, and the piece is best read as a story about workflow more than tax.

The appeal is plain from the balance sheet: money spent on a home leaves the donor's taxable estate together with its future appreciation, and the child starts building equity instead of paying rent. Jennifer Raess, associate general counsel for estate and tax product at Vanilla, frames the human side as the essence of giving while living: clients get to watch the gift improve a family's trajectory in their own lifetimes rather than after death.

Brad Owen, regional director and partner at EP Wealth Advisors, sees the conversation constantly in Southern California, where clients have become the Bank of Mom and Dad, either lending children money toward a purchase or making an outright gift. Owen's description of the payoff has a familiar ring: children become homeowners sooner and begin building equity, and the parents get the satisfaction of seeing their wealth make a difference while they are alive. Estate-planning advisors say the requests have spread beyond the ultra-wealthy.

Still, the mechanics have not caught up with the sentiment: a home purchase almost always exceeds the annual gift tax exclusion of $19,000 per donor in 2026, and while married couples can elect to split gifts and give $38,000 without creating a taxable gift, anything above that line consumes a slice of the client's lifetime exemption and triggers IRS Form 709.

The return itself is not the hard part; the accounting around it is, because the exemption is consumed piece by piece and every subsequent gift and every future estate plan depends on an accurate record of what was used and when. Grandparents have a second layer to manage: a gift to a grandchild is a direct skip, requiring an allocation of generation-skipping transfer exemption to prevent a second tax. These are known rules, but in practice they are only as good as the file the advisor keeps.

Raess identifies the trap that separates a home from a stock gift: if a parent stays on the title or continues to live in the home, a retained interest can pull the property back into the parent's estate, so the gift that was supposed to remove an appreciating asset ends up doing the opposite. That subtlety is why the conversation cannot remain at the level of family sentiment.

For an RIA, the lesson is process, because the same family that asks once will often ask again and family wealth tends to repeat its patterns. If the first gift was handled with a filed Form 709 and a written note on the exemption used and the title arrangement, the second is routine; if the first was an informal transfer, the second starts with reconstruction.

The tax attorney and the CPA will sign off on the details, but neither one is usually in the room when the subject first comes up; the advisor is. Building a home-purchase protocol now, with a checklist covering the annual exclusion, the gift-splitting election, Form 709, the GST allocation for grandchildren, and the title question, gives the RIA a reason to be the first call when the Bank of Mom and Dad opens for the next loan.

The family is not likely to stop asking, and for many clients the gift itself makes sense; the question is whether the firm can handle the second gift as smoothly as the first. That turns on the file: the filed Form 709, the note on exemption used, the title arrangement written down. The file is the part the RIA controls.