6. Be Willing to Compromise
For clients who are unsure how to best help certain relatives now without jeopardizing the clients’ financial security or family harmony, a compromise might be in order.
First, have the family members in need apply for a loan at a traditional bank or credit union to cover the big expense in question. The client may have to co-sign for the loan, which means she will be on the hook for it if the borrowers can’t make timely payments.
Then, if and when the borrowers are unable to make the monthly payments on the loan, the client can step in and make the payments, keeping in mind the aforementioned annual and lifetime gift restrictions. Every time the client makes a payment on the loan, she could also give a similar amount of money to other family members of similar standing.
For instance, let’s say a client’s adult child is buying a house and needs a 30-year fixed rate mortgage of $200,000 at 4.5 percent. The monthly mortgage payment would be about $1,000. The client would co-sign for the mortgage, and then if the kid runs into trouble down the road, the client would make the $1,000 monthly payment and then give $1,000 to each of the borrower’s siblings.
Making smaller gifts now to all family members makes sure that they get the money when it matters most but also ensures that the money will last at least as long as the client lives.