San Diego Estate Planning Lawyer Blog
Often as parents or grandparents, we want to give or loan money to our children or grandchildren. Sometimes these amounts can be substantial and the question arises as to whether it should be a gift or loan. If the amount is significant, you may feel also feel that out of fairness to your other children, the loan or gift should be mentioned in your estate plan to even out the eventual distribution of your estate.
You first need to decide whether a gift or loan is appropriate. A loan means you expect to be repaid while a gift is given without any expectation that the money will be repaid.
If your assistance is to be a gift, remember that in 2009 you can gift $12,000 to any one person. If you are married and want to give a gift to your child for a car or a down payment on a house, for example, you and your spouse can give $24,000 per year. If the amount is over $12,000 per person, the IRS requires that you file a gift return.
If you are loaning money to a family member, it should be supported by written documentation such as the amount loaned, the terms of repayment, interest charged, etc. You may want to include a provision as to how problems with repayment will be resolved. Also remember that there are tax implications for certain intra-family loans so you should check with your tax consultant if the loan is over $10,000.
Some people also consider including a provision in their trust that a loan that has not been repaid before their death shall be deducted from that beneficiary’s share during distribution so that other beneficiaries are not slighted. Also for example, if you have given a child $100,000 to start a business or obtain an advanced degree, you may want to note in your trust that the amount should be deducted from that child’s share so that your children will still share equally in your estate at your death.
If you need help with intra-family loans or deciding whether to gift or loan and whether you should put a provision in your trust, contact us at Law Office of Scott C. Soady, A Professional Corporation for a complimentary consultation.