Scottsdale, AZ · Member since 2016 · 8 posts · 0 votes
I am going to lend money to a family member to pay delinquent mortgage payments, and a few bills. He is going to list his home for sale in the next 10-14 days. The money from the sale will be used to pay me back with interest, as well as a portion of the proceeds. However, he has a history of drug use as well as medical issues that could cause him to pass any day. The family member ( property owner) and the beneficiary have agreed to sign any personal forms or contracts. What legal forms do I need to protect myself, to have an added layer of protection?
Where do I get these forms? Lawyer, title, self create?
There isn't a ton of juice in this deal, so any cost savings or strategies would be appreciated.
I am going to lend money to a family member to pay delinquent mortgage payments, and a few bills. He is going to list his home for sale in the next 10-14 days. The money from the sale will be used to pay me back with interest, as well as a portion of the proceeds. However, he has a history of drug use as well as medical issues that could cause him to pass any day. The family member ( property owner) and the beneficiary have agreed to sign any personal forms or contracts. What legal forms do I need to protect myself, to have an added layer of protection?
Where do I get these forms? Lawyer, title, self create?
There isn't a ton of juice in this deal, so any cost savings or strategies would be appreciated.
So what you want to do is create a bona fide loan under 166 in case it becomes a bad debt loss you can take as a short-term capital loss in the year it becomes worthless.
Depending on the amount you may want to make sure that you have evidence of attempt to enforce the obligation on lapse of payment.
You want things like:
Evidence of indebtedness (written or printed)
Interest rate consistent with risk-profile
Collateral
Payment Schedule
History of Payment
Enforcement efforts evidence on non payment
Ability to lend and repay
Consistent treatment across tax forms
Remove any evidence of there being payment subject to conditions. You want an unconditional obligation to pay a fixed or determinable sum in the future.
Also any related party transaction is subject to greater scrutiny due to there being a potential lack of adverse interests, but instead possible collaboration the undermines arms-length principles.
There are ways to solve this. One way is putting the title in a Land Trust (Revocable Trust) Since I am not a lawyer will not attempt to give legal advice. You have to think outside the box.
Thanks for the intel on this guys. I will look to get this solidified. Eric, I will keep a good ledger on this, to ensure all is accounted for. Some good suggestions.