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How can I lend my son some money without the risk of creating a dispute between my children at my death?

Posted on Tue Dec 1, 2015, on Estate Planning

From our “Ask a Question” Mailbag: Loaning Money to a Child

Most Recently Updated August 1, 2018.

“I want to loan my son some money at a low rate, but I do not want to create a fight between him and my other children at my death. What do you suggest?”

Loaning Money to a Child

Loaning Money to a Child

Interfamily loans can become the source of much conflict between the children of a deceased parent. I find the best way to defuse the situation is to document everything very clearly, to keep the family informed about the loan, and to address the loan in your will.

Documenting the loan can be very straightforward and the loan terms can be written out on one or two pages. It is important that the interest being charged and how much has been repaid before your death be easily explained so your other children do not think that their brother is avoiding repaying any part of the debt.

Documenting the Loan in a Will

I like to also document in your will that the loan will pass as part of your son’s share of the estate to him or into a protective trust. If you forgive the loan, then he has to report the forgiven portion as income and pay income taxes. If, instead, the note pours into a protective trust, he can repay the loan without reporting income and then the repaid amount is available to him but protected from divorce and creditors.

There are many ways to address this issue, and if you wish to set up a free consolation and give me more facts I can give you more details that will address your unique circumstance.

More Planning Questions?

Loaning Money to a Child is only a piece of the Estate Planning process. By all means, if you want to learn more, please read my more detailed article, Estate Planning Everything You Need to Know.

In Conclusion: Loaning Money to a Child

I hope that this article was helpful in explaining how to document a loan. Further, I included links to even more detailed information on my website so you can learn more. Therefore, please contact me and let me know how I did. Certainly, your comments and questions are welcome!

Let our Estate Planning lawyers help walk you through what can be a confusing process. To begin with, call to speak to one of our experienced estate planning lawyers.  By all means, our lawyers are ready to answer your questions. In fact, feel free to contact our office for a free consultation. Ultimately our goal is to make the process as painless as possible!

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Estate Planning, Estate Planning Attorney, Estate Planning Lawyer, Pennsylvania, Philadelphia

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