Sometimes skipping the challenges and the expenses associated with commercial bank loans can make good sense if someone in your family has the ability to loan you money in the short term. Attempting to make a major family purchase can be difficult for those people who are trying to approach traditional banks. This is why intra-family loans have become more popular.
This involves a family member, such as a parent, lending money to another family member in a formally structured agreement. More versatile payment options, lower interest rates, and opportunities to connect this to estate planning are some of the reasons why these loans have become more popular.
Of course, loaning to another family member always comes with a level of risk. But intra-family loans could make sense if the recipient has another source of income or a method to pay the loan back. Intra-family loans can work particularly well in situations in which the money that is being given is below the $15,000 tax exclusion threshold for individuals.
Remember that this threshold increases to $30,000 for married couples. This means that there is no gift tax due so long as other gifts throughout the year do not push that amount over the annual exclusion. Sometimes giving property to family members outright, however, is not the right decision based on your family dynamics. Sitting down to talk things over with an experienced estate planning attorney in California can help you to figure out the most appropriate way to distribute your assets.