Back in “the day” when a young person buying a home needed some help from his/her parents to get their first mortgage, the parents would act as “guarantors” of the mortgage. This obviously came with risk to the parents, but more often than not, after those risks were explained, parents were willing to sign on the dotted line to help their kid get that coveted first home. A few years later, the banks had gone through some enforcement procedures, suing parents where their kids had defaulted on their mortgages, and in some instances, the parents were successful in defending those actions by claiming they didn’t truly understand what they were signing when they had originally executed that guarantee and they got nothing in return for doing so. The banks got antsy about this, and so started requiring the parent to go on title with the kid, so they were getting something in return for signing off on the mortgage. This, however, had an impact on the kid (and their ability to deal with the home however they wished) as well as the parent. There were both tax and estate planning implications to these arrangements. So we started out trying to minimize some of these issues by giving the parent a 1% interest in the home so, for instance, if the child sold the home 5 years later, the parent would only have to pay capital gains tax on 1% of the increase in value. Keep in mind that usually, in these situations, the parent already has his or her own principal residence and so any other properties they “own” would be subject to capital gains taxes on sale.