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Wednesday, March 13, 2013

Formalize your loans to your children

I'm attaching a link to an article from Jim Yih, a financial advisor and author of the  blog, that talks about why parents might want to formalize loans, financial gifts or advances on their children's inheritance. There are some good ideas here, so check it out by clicking here.

I was glad to see that Mr. Yih discussed parents giving instructions in their wills for dealing with these financial transactions. What the majority of parents fail to realize is that if they don't leave instructions for their executor, the law automatically characterizes loans and gifts as being advances on the child's inheritance. This means that without supporting paperwork, the executor will have no choice but to reduce the child's inheritance by the amount of the loans or gifts. Believe me, that causes no end of heartache when the child in question believed that it was a gift from his/her parents with no strings attached.

The best idea is to consider doing as Mr. Yih suggests and formalizing financial transactions between you and your children.

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