Why you should loan money to your children and not gift it to them

Why you should loan money to your children and not gift it to them.

We all want to help our kids and give them the best start in life. This could be by gifting the deposit on a house or other moneys that they may need from time to time.

However a more prudent option is to loan the money to your children and not gift it to them. This will help eliminate the concern if they end up in a messy divorce. If it is treated as a genuine loan then the parent should get the money back.

However if it is treated as a gift then the parent will probably lose the lot. The loan will need to be a properly drawn document that specifies the amount, interest and repayment date. The parents can then forgive the loan in their Will.

Setting up theses legal arrangements at the start may well save you hundreds of thousands of dollars.

For more information please contact: Evan Sarinas of Sarinas Legal.

This release is not intended as legal or financial advice and all liability is disclaimed for reliance on it.