Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. Three years ago, a 45-year-old office manager gave her 24-year-old son $15,000 to help him recover from a failed business venture. It wasn't supposed to be a gift.
He told her he'd pay the money back within a year, once he found steady work. Today, she's three months behind on her mortgage and trying to rebuild the financial cushion she lost in the process. She isn't taking her son to court or cutting him out of her life.
Instead, she's changing how she handles her own money, starting with making sure her bills and savings are taken care of before she considers helping anyone else. This Jeff Bezos-backed platform lets eligible investors buy fractional shares of rental properties for as little as $100. Deloitte's #1 Fastest-Growing Software Company Lets Users Earn Money Just by Scrolling — Investors Can Still Get In at $0.52/Share It's one thing to help an adult child cover an unexpected expense.
A $15,000 loan is different, particularly when the parent doesn't have enough money set aside to comfortably absorb the loss. Family loans also have a way of becoming less formal than they should be. A promise to "pay it back next year" can sound straightforward when everyone expects things to work out.
If the borrower can't repay, however, the parent can be left choosing between pursuing the money and protecting the family relationship. There can also be tax considerations with certain family loans. IRS rules on below-market loans can apply in some circumstances, including loans made with little or no interest.
The details depend on the arrangement, which is why anyone considering a substantial family loan should understand the applicable rules and document the terms. For this mom, the bigger issue was more immediate: The $15,000 was money she ultimately needed for herself. Once she realized she couldn't keep covering the gap on her own, she contacted her mortgage lender.
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