Chances are your first-time buyer clients are relying on parents to purchase a home – and that’s an opportunity for brokers to provide some strategic planning for those home buyers.
A massive percentage (76%) of Canadian parents gift their adult children with money to help with achieving big ticket life goals, including buying a home.
"The poll findings show that while many parents are thinking about giving their kids a financial boost to leave the nest, there are a lot of misconceptions about gifting," Jamie Golombek, managing director, tax and estate planning with CIBC Wealth Strategies Group, said in his new report, entitled Give a Little Bit…
"Unlike in the U.S., we don't have any kind of gift tax, which means if you have what's called 'never money' – money you'll never spend in your lifetime – it's worth considering making a financial gift while you're alive to help your kids get started in life."
The study, which was based on a CIBC poll of 3,021 Canadian adults, found 47% of parents would provide a gifted downpayment to their children; an additional 25% would act as a guarantor.
Of those polled, 65% said they would prefer to give a financial gift to their children rather than have them continue to live at home.
The national average gift size if $24,125 and those with household incomes above $100,000 provide an average of $40,558 – nearly double the overall average amount.
One interesting note found in the study is that the majority a majority of Canadians (68%) either misunderstand or don’t know what the tax implications of gifting are.
That means brokers have an opportunity to position themselves as experts when they explain that gifts are not subject to any tax.