Would you take the money?

amother

Wed, Feb 13 2013, 5:51 pm

I have about $20k of student loans. This never really stressed me out - IYH the career I hope to pursue will be relatively lucrative and I already have a job in my field. We currently have a nice amount in savings, that, while we are hoping will one day go toward a house, can help us out if C'V DH or I were to lose our jobs.

Last week, my ILs offered to give us the money for the loans -- we would pay THEM instead of the government in order to avoid the high interest fees. I like my ILs, I'm NOT concerned they're trying to "control" us or hold this over our heads ("oh, we gave you the money, now do XYZ.") But part of me hesitant to take the money and I cannot put my finger on why. Legal issues? Are there any? Do we need a contract? Is that ridiculous?
What would you do?

amother

Wed, Feb 13 2013, 6:05 pm

it's a very nice offer.

all things being equal I would do it.

That said, I feel like saying "trust your gut" but your post seems to indicate you have a nice relationship etc.

do you have any idea about what's bothering you about it? maybe if you get a bit of clarity on that you could move forward and if there is no reason not to it is a benefit obviously to your family to avoid the high interest etc.

hatzlocha

amother

Wed, Feb 13 2013, 6:14 pm

amother wrote:

I can't figure out why you don't trust in your in laws, you did not indicate in your post any reason for doing so. My parents lent us money for a down payment for our house and we pay them back at a really low interest rate. It's been a number of years (we're still in middle of repaying) and all parties involved are very happy (at least my husband and I are very grateful for having been saved higher fees and my parents have never indicated that they regret the decision to lend us the money).

Tova

Wed, Feb 13 2013, 7:17 pm

Squishy wrote:

Without knowing more, I would have your ILs write the check to you and you pay the loan. If they pay it on your behalf it could be construed as income to you and you could be liable for tax and penalties.

Tax law is form over substance.

Actually it's a gift. Whether they pay her directly or the loan. No income to the recipient. Potential gift tax filing on parents, but not at $20,000 (each parent can give $13,000 exclusive of gift tax).

amother

Wed, Feb 13 2013, 7:30 pm

abby1776 wrote:

Interests rates are really low for student loans you can lock in like a 3% rate - also you get discounts for paying regularly, and it helps your credit score to pay the payments regulalry
So I am not sure about the benefits of taking the money from a family member to pay them off.

My loans are that rate but I locked in years and years ago. If ops loans are more recent they're likely to be much higher.
If they ARE in the three percent range, op, IMO you'd be much better off investing your ils money in the market than repaying your school loans. Not that your ils would necessarily go for that.

33055

Wed, Feb 13 2013, 7:34 pm

Tova wrote:

Squishy wrote:

It is definitely not a gift as she is obligated to repay the loan.

The annual exclusion is $14,000 not $13,000.

Perhaps the 0% interest could be construed as a gift. There is a $5,250,000 lifetime exclusion in 2013 so OP's ILs have no gift tax liability.

Tova

Wed, Feb 13 2013, 9:25 pm

Squishy wrote:

Tova wrote:

Squishy wrote:

Missed the part about repayment. Still wouldn't be income to her, when you get a loan it's not income. Annual exclusion was $13K for the past couple of years, sorry for not checking if it was updated.

The $5 million is a lifetime estate exemption. Gifts over the annual exclusion to each recipient have to be reported and GO AGAINST the lifetime limit. I never said they had a liability on the gift. I said "potential gift tax FILING" which is absolutely true. You have to file the gift tax return even if you owe no tax.

amother

Wed, Feb 13 2013, 9:30 pm

I'm the amother who borrowed money from her parents for a down payment for our house, and said it worked out very well.

I am so grateful to my parents for giving us this loan, I know they want the best for us and to help us out any way they can. . .

I'm surprised at how many people are advising you against it. I really hope that one day I will be in the position to help out my children in the same manner and hope they will trust me enough/be comfortable enough to take me up on my offer. I will be so happy to help them!

33055

Wed, Feb 13 2013, 9:46 pm

Tova wrote:

Squishy wrote:

Tova wrote:

Squishy wrote:

I understand it is a loan and not income. That is why she should have dominion and control of the money and then pay off the student loans so there is no confusion. She could have a formal loan closing but I think my alternative is cheaper and less confusing. It is only $20,000 and not worth big attorney fees.

OP needs to avoid a situation where she has her returns examined. Who needs the aggregation?

Karnash

Thu, Feb 14 2013, 3:06 am

I do this often with my children. Lend them money when they're in a tight spot or need for a specific purpose, and we agree beforehand how it will be paid back. No strings attached - ever, and we're much more understanding than the bank if there have to be delays.

If parents can do it, why not? I can't afford to give large sums to my married children - and I believe you have to give all equally, so this way, they borrow when they need it.

amother

Thu, Feb 14 2013, 3:29 am

amother wrote:

I would have agreed With this 10 years ago. Now I'm older, wiser, and more experienced in life.

amother

Thu, Feb 14 2013, 4:49 am

I would advise against accepting or lending money from/to family as well.
What happens in the case of a death ch"v of your married child? It becomes unclear as to whether you need the child in law to keep paying back. Especially if you need the money but feel bad to press the financially stressed, newly widowed child in law. BTDT unfortunately. Led to disastrous results.
Parents needed the money even with a very flexible payment schedule. Widowed child in law was amazed that repaying was still on the table at all and refused in indignation and frustration.

shalhevet

Thu, Feb 14 2013, 5:08 am

amother wrote:

I hope you have a heter iska.

amother

Thu, Feb 14 2013, 5:34 am

amother wrote:

Something similar sadly happened to relatives of mine too. So sad. And at a time when they all needed eachothers shoulders. Money brings out the worst.