The financial and emotional costs of lending money to an adult child runs high.
With credit markets still tight, it can be hard to secure a loan and
many cash-strapped adult children are seeking help from the bank of mom
and dad. Experts advise that parents do in fact act like a bank and set
an interest rate (even if it is far less than a traditional bank rate)
and create a payment plan.
But it can be a hard decision on whether to make the loan: You want
to support your children, but you also want them to learn the lessons
saving for what they want, and financial hardship, teaches.
“Parent-child loan arrangements can be great to help give kids a head
start by buying a house, starting a business or going to school, and
they can be a valuable part of many parents' estate plans,” says Alvi
Aggarwal, an estate planning attorney with One Point One Legal in
Alexandria, Va. “There are some legal and tax concerns, but it's easy to
avoid major pitfalls by properly planning and carrying out the
transaction.”
DelMarVa's Premier Source for News, Opinion, Analysis, and Human Interest Contact Publisher Joe Albero at alberobutzo@wmconnect.com or 410-430-5349
Yeah-I wish we had the ability to loan money to our kids. The reality is families living paycheck to paycheck (myself included) have no chance in hell of helping our children have a better future. Fortunatly, they understand the position we are in, are a bit more financially savvy and I think, will be much more appreciative of the things they have because they have done it themselves.
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