Loaning money to family

Loaning money to family spells trouble. The fact is, most people agree that while you may have a decent experience with loaning money to family, it is really never a good idea. Money has the power to get in the way of good relationships. It can cause resentment if it is not paid back. It can cause guilt that leads to isolating yourself because you aren't paying someone back, etc. So, with that said, the following are a few rules for loaning money to family.

1. Do not loan money that you can't live without. When you give a family member a loan, consider it a gift. That way if you get paid back, you will be pleasantly surprised. If you loan money to a family member with the expectation of getting it back, you are often setting yourself up for disappointment, which means that you will not be happy with them, and it may cause some problems with the relationship, and the relationships in your family.
2. Do not loan sums over $10,000. It is permissible to gift up to 10,000 to someone without it becoming a tax issue. So, when you "loan" someone money, do not lend over that amount, unless they are paying interest, otherwise, you could be in trouble with the IRS, as could they.
3. If it is an actual loan, it needs to have a contract and terms of repayment. Have a lawyer draw it up so that it is all done properly, and make sure that the terms are as clear as possible. So, if you expect a certain payment amount monthly, specific the date, late fees if they do not pay on time. If you do make up an actual loan, you have to make sure that like a bank, you check their ability to make repayment. The thing that is hard is when you do not get paid. If you expect it, and they don't there are going to be personal feelings involved. Them not paying you may take something away from your family. They may feel the same, that if they do pay you, you are taking something away from their family that they would not have the money for otherwise.
If someone in your family needs help financially, consider other ways to help them besides a loan. Maybe you can watch their child so that they can work more hours, or maybe you can make them some meals, so that they do not have to buy groceries, etc. Find ways to help that you are comfortable with, and that do not leave you at risk, and your relationship in jeopardy. Sure, you may not love babysitting for free, but it is better than giving them money from your child's education fund, or something else, and never seeing that money again. So, find a solution you can be comfortable with.