Sometimes our children or close family members run into a financial bind and need to borrow money. In many cases both the lender and the borrower assume that this money will be paid back quickly. What happens if the lender, who is frequently an elderly parent, dies before the loan is repaid? In my experience this is when the family feud begins, as the borrower will say this money was a gift to them, and the other beneficiaries, frequently the borrower’s siblings, will feel it is a loan that should be repaid from their inheritance. You can avoid this devastating situation by talking to an experienced estate lawyer. If your intention is to have money provided to your children by an advancement on inheritance, the amounts you have advanced should be clearly documented and you should have a clause in your Will saying any advancements are taken into consideration when the estate is divided up. If you are going to “gift” this money to the borrower, then your estate documents should clearly indicate these funds were a gift and you may want to consider “gifting” money to your other beneficiaries to avoid hard feelings. This is a complicated situation, which if not handled correctly, can cause the destruction of one of your most prized possessions: your family.
If you have questions or concerns about lending or gifting money and the implications on your estate plan, please contact our team at Estate Connection to discuss your needs. Remember, we are here to help!