Related Party Loan Forgiven on Death

  1. 3,077 Posts.
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    I am wondering if it is legal and legitimate for to make substantial loans adult children as home loans AND to have these loans FORGIVEN on my death so that it does not become part of my estate?

    What I would like to do is just have the amount forgiven on my death without it going through probate etcetera. I do not want to get into setting up family trusts at this point and I do not want to just gift this while I am alive as I would use the interest received while I am alive. Interest would be a rate between what a bank would charge them and what the bank is paying me.

    My children are the sole beneficiaries of my will. There are no skeletons in the family tree and there can be no other legitimate claims on my estate. I have no debts so there is nothing to pay on my death (not even the funeral cost). I would be ok financially with or without the money loaned if they decided to do the dirty and not pay interest (which I think is unlikely in any case).

    If it is legal, and there are no regulations preventing me from doing this, are there any gotchas from third parties that I should be aware of or need to investigate. I am not worried about the obvious gothcas from the kids e.g. divorces, illness, death, not paying back the loan etcetera.

    Anyone done this and alive to tell the story?
 
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