Report: Children of affluent parents are more likely to receive a ‘living inheritance’

Parents who help their children with the down payment on homes are transferring income inequality to the next generation of homebuyers, according to a new report from Mustel Group and Sotheby’s International Realty Canada.

The report found that one-third of baby boomers in four of Canada’s largest metropolitan areas – Toronto, Vancouver, Calgary, and Montréal – have given or are planning to give “living inheritances” to relatives to help them buy homes.

Those who have annual household incomes of over $100,000 are nearly twice as likely to gift a living inheritance for the purpose of buying a home. Forty-nine percent of respondents in this income bracket said they plan to or have already given funds for this purpose, compared to only 27% of those whose household incomes fall below $100,000.

Also read: Transferring RRSP funds to help children buy homes

“The amount of funds transferred predictably varies with household income: the median amount given by those with household incomes under $100,000 is approximately $25,000, with 72% of living inheritances falling under $50,000,” the report said.

“In contrast, only 53% of living inheritances gifted by those in households with income over $100,000 are under $50,000; 25% are between $50,000 and under $100,000, 10% are between $100,000 and under $200,000, 10% are between $200,000 and under $500,000, and the remainder of gifts are over $500,000.”

Unsurprisingly, beneficiaries of baby boomers with household incomes over $100,000 are slightly more likely to buy homes in higher price ranges. Nineteen percent of these beneficiaries purchased homes from $500,000 to under $750,000, and 10% purchased homes over $750,000.

In contrast, only 12% of beneficiaries of less affluent baby boomers purchased homes from $500,000 to under $750,000, and 9% purchased homes over $750,000.

The report is based on findings from a survey of 2,026 urban baby boomers, aged 52-71, in Canada’s four largest census metropolitan areas. Data was gathered from August 29th to September 25th, 2017.

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