{"id":274242,"date":"2025-11-09T23:43:14","date_gmt":"2025-11-09T23:43:14","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/274242\/"},"modified":"2025-11-09T23:43:14","modified_gmt":"2025-11-09T23:43:14","slug":"ny-dad-gave-his-son-117k-but-his-hidden-motive-made-things-awkward-why-dave-ramsey-says-it-was-a-dumb-idea","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/274242\/","title":{"rendered":"NY dad gave his son $117K, but his hidden motive made things awkward. Why Dave Ramsey says it was a \u2018dumb idea\u2019"},"content":{"rendered":"\n

With housing prices already high and on the rise, it\u2019s not uncommon for today\u2019s homebuyers to require help with making a down payment.<\/p>\n

According to a 2025 survey from Redfin, almost 24% of Gen Zers and millennials who recently bought a home used a cash gift from either a family member or an inheritance to finance a down payment.<\/p>\n

Allen, a married semi-retiree from New York with a net worth of roughly $3 million, wanted to help his son with purchasing a home. He and his wife are looking to downsize and spend more time at their home in Florida, and since their son in Colorado needed help with a down payment, they decided to give their son a $117,000 gift (1).<\/p>\n

The problem? The gift had some strings attached, and as Allen explained to hosts Ken Coleman and Dave Ramsey on The Ramsey Show, the conditional gift has made things very awkward.<\/p>\n

According to Zillow, the average home value in Colorado is $540,183 (2). But in some cities in the state, housing can be even pricier. In Boulder, for example, the average home value is $948,562 (3).<\/p>\n

Since Allen\u2019s son lives in a state with high housing prices, Allen and his wife were happy to help their son with a down payment on a home with a finished basement. But the agreement that came with the gift was that Allen and his wife would be able to live in the basement when they visit their son in Colorado.<\/p>\n

Now, after realizing their new home is smaller than they had hoped, Allen’s son and his partner no longer want the parents to stay in their home when they visit and would like to pay Allen back for the gift. This, however, leaves Allen with two potential problems.<\/p>\n

First, Allen is worried about a huge tax bill if the gift is repaid. Secondly, there is some animosity over the situation, which is bad for everyone involved.<\/p>\n

Allen also doesn’t want his son to pay him back using his or his partner\u2019s retirement accounts. Making a withdrawal from most retirement accounts before the age of 59 and a 1\/2 can trigger a 10% penalty, and removing $117,000 from retirement savings could mean risking a shortfall later on.<\/p>\n

Allen doesn\u2019t necessarily have to worry about a tax bill, as there\u2019s an annual gift tax exclusion of $19,000 per person for 2025. So if Allen and his wife were to be repaid $38,000 per year until the entire $117,000 is returned, they don\u2019t even have to report that money to the IRS.<\/p>\n

Story Continues <\/p>\n

For gifts exceeding the annual gift tax exclusion, there\u2019s still not necessarily an automatic tax bill. In that case, the sum received is applied to each person\u2019s lifetime gift and estate tax exemption.<\/p>\n

Under the Tax Cuts and Jobs Act, the current lifetime gift exemption is $13.99 million, but that exemption is set to expire at the end of 2025. If it’s not renewed, the lifetime gift exemption will revert to the $5.49 million exemption that existed prior to 2018. That $5.49 million, however, will be eligible for inflation adjustments (4).<\/p>\n

But while Allen may not be looking at a huge tax bill, he could be looking at a damaged relationship with his son. That\u2019s a problem Ramsey suggested solving by owning up to his mistake and letting his son off the hook as far as their agreement goes.<\/p>\n

With a net worth of about $3 million, Allen can easily rent a condo or pay for hotel rooms when he and his wife want to visit their son in Colorado.<\/p>\n

\u201cThis was a dumb idea,\u201d said Ramsey. “You don’t need to live in somebody’s basement when you have $3 million.”<\/p>\n

Read more: Are you richer than you think? Here are 5 clear signs you\u2019re punching way above the average American\u2019s wealth<\/a><\/p>\n

Ramsey\u2019s advice to Allen was to call his son and say, “I’m really sorry. I entered into a really stupid idea.” Ramsey also encouraged Allen to just forget about the agreement and make it clear that his son is welcome to keep the gift with no strings attached.<\/p>\n

“A gift is not a gift if it has conditions,” said Ramsey.<\/p>\n

In this situation, as Ramsey explained, Allen didn’t really give his son a gift. Instead, the host called it more of a “purchase of ownership in the basement.”<\/p>\n

If Allen’s intent was to earn back the $117,000 in the form of free lodging during numerous visits to Colorado, the numbers may have made sense in his head. But in that case, it’s still misleading to call the money a gift.<\/p>\n

The IRS even says on its website, “You make a gift when you give property, including money, or the use or income from property, without expecting to receive something of equal value in return (5).” By that definition, the money that Allen gave to his son was not necessarily a gift if he expected to get something out of it.<\/p>\n

If you’re thinking of giving a grown child of yours a financial gift \u2014 whether to buy a home or for another reason \u2014 it’s important to recognize that a gift, by nature, is not something you\u2019re supposed to get back in some shape or form. It’s also important to discuss that gift openly and make sure everyone involved is on the same page.<\/p>\n

Similarly, if you’re the recipient of a gift from a parent or another relative, it’s important to make sure you’re clear on its terms. If the money needs to be repaid at some point, it’s not a gift; it’s a loan. If the money requires you to sign a contract agreeing to something, it’s also not a gift; it’s a payment in consideration for something else.<\/p>\n

Whether you’re the giver or the recipient, you don’t want a financial gift to wreck a close relationship, especially when it\u2019s with your child. Having open conversations could help you avoid a situation like the one Allen wound up in and now has to fix.<\/p>\n

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We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n

The Ramsey Show – YouTube (1<\/a>); Zillow (2<\/a>, 3<\/a>); Charles Schwab (4<\/a>); Internal Revenue Service (5<\/a>)<\/p>\n

This article originally appeared on Moneywise.com<\/a> under the title: