Keep in mind that your loan may, in fact, end up being a gift, no matter how many forms you draw up to protect yourself.

Jenn, who has watched her MIL & FIL "loan" upwards of $50k to two SILs over the past few years. They will never see that money again.

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I think one must be psychologically prepared to treat any family loan as a gift, but the gift vs. loan question can have a tax impact if the amount is $10,000 or more. If it is a gift, you may have to file a gift tax return if the amount exceeds the annual gift exclusion (currently $12,000). If it is a loan with a balance over $10,000 and you do not charge a market rate of interest, you can end up paying income tax on the imputed interest (the difference between the interest you did charge and the interest the IRS figures you should have charged). For very large loans or loans that have a long term to maturity, the failure to charge market interest can also cause gift tax problems. State taxes may also be affected. Do not rely on this posting for protection against tax penalties--get advice from your own professional tax advisor.

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I hardly think it's ever a good idea to lend money to people unless you don't really expect it coming back. It tends to stress friendships unnecessarily. I wish this weren't true but unfortunately in most cases it is. No matter how secured the loan is. Call me cynical.

Adrien
http://www.TheNakedHippie.com
Organic Tshirts

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The best way to about this is, if you have the extra money and a family member or friend is in dire straits give it to them. This is what I do. I have lent money many times in my younger years and NEVER not even once got it back or any part of it. People who go broke tend to be irresponsible with their money. If they are broke chances are they will get even worse off in a few months. They tend to never want to see you again because they are embarrassed. You will lose them forever. After I got a little older I realized this and now I say here is the money if I want to give it and I say cleary this is a gift. If sometime in your life things get good for you and you want to repay it please do. I say nothing else. I have done this several times, never did ever get a dime back but I did not lose someone I cared about. I think this is better.

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My advice is to not lend money to family or friends. It will cause more problems than it is worth and you probably will never see it again - or them. There is a reason they can't borrow money through traditional means - like they don't pay it back! I learned a lot about spending, SAVING and living a "richer" life from the book "How to Become Filthy Rich on Your Current Income" at www.how-to-become-rich.com. If people read books like this one they would be a lot smarter and have more money.

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i have been reading your page for some time this is a good thing you are doing many people dont have anyone to help them in their every day life. i am a very private person and i have no living adult with experiance to help. i just dont ask anyone,my doctor gives me suggestions but thats all i have so god bless you and your family i see and read what you do for completa strangers i think it is wonderful randi

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