In her article in Kiplinger Personal Finance, “A Guide to Lending Money to Family Members“, Ella Vincent cautions generous relatives to keep one thing in mind: there’s a chance they won’t get the money back. “You should never lend more money than you can afford to lose,” is Vincent’s advice. Still, she acknowledges, an intrafamily loan can:
- give you the satisfaction of offering a helping hand
- provide a loved one a low-cost way to borrow needed funds
There are tax rules to consider as well, as we point out to our Geyer Law estate planning clients. Those rules determine the AFR (Applicable Federal Rate), which is the minimum rate of interest that must be charged on short-term (up to three year), mid-term (3-9 year), or long-term (10 or more year) intrafamily loans.
According to the Consumer Financial Protection Bureau, money arrangements among friends and family are very common, with 1-5 U.S. adults receiving financial support that way. In fact, CFPB offers a worksheet to help consumers structure such a conversation.
At Geyer Law, we understand that intrafamily discussion of financial and estate planning matters can be awkward and emotion-laden, so, using the insights our attorneys have gained from decades of helping Indiana families deal with sensitive decisions, we help arrange family conferences. From a practical standpoint, such conferences (either in-person or digital) can allow family members to share the values and assumptions – along with the sensitive issues – that go into their decisions.
If, rather than a loan, you are making an outright gift of money to a family member, it is important to set clear expectations for how you’d like that money to be spent, Western Union advises. Sure, you want to support family in their time of need, but don’t overlook your own financial stability. The authors remind givers to be conscious of the IRS rules (the gift tax annual exclusion amount, which is $19,000 in 2025). If the gift relates to a down payment on a house, home loan lenders require a letter proving the money is intended as a gift.
“Giving money to family members can be a meaningful way to help support their goals, but it’s important to approach it with a clear plan,” savantwealth.com cautions. At Geyer Law, we agree. Our aim is to help clients lend and gift in ways that help, not enable, family members to realize their goals.
– by Cara Chittenden, Attorney with Rebecca W. Geyer & Associates
