Helping Your Grown Child Buy A Home

October 2000  -- Marriage brings many exciting new opportunities. Part of a couple's new life may be the purchase of their first new home. But housing prices in many parts of the country put this goal out of reach for all but the highest earners, at least in the beginning. What's the answer to help them out? Maybe mom and dad.

There are a variety of ways to help the kids get into home sweet home. The first hurdle that must be overcome is the down payment, but coming up with that kind of money takes some planning.

"A parent can help their child with their first home purchase without disrupting their financial plan or investment discipline by finding a financial institution that will allow them to pledge securities versus sell securities and give the cash down payment to the child," said James Cotto of Merrill Lynch.

And pledging the securities instead of selling them could have some benefits at tax time.

"There is only one tax advantage and that would be if the parent needed to sell securities in order to come up with the down payment for their child," Cotto said. "If they find a financial institution that allows them to pledge securities instead of sell them that'll save them the potential taxable event."

Helping your adult child buy a home is certainly an act of a caring parent, but if the right safeguards aren't put in place in the beginning, it could become a mistake that you and your child will regret for years to come.