Being the Family Banker

“Think of giving not as a duty but as a privilege.”—John D. Rockefeller

A physician’s family members often look on him/her as a source of money when their cash flow gets tight (an all-too-common occurrence nowadays), or when they want to finance a car, a home, or a fledgling business. Experts caution, however, that if a relative is looking for a loan, it may be best to think of it as a gift—the chances of getting paid back are often slim to none.

In fact, under current tax laws, you can give up to $12,000 a year to any one person ($24,000 if your spouse joins you) without incurring any gift taxes. So, if you have the cash, you and your spouse could give as much as $48,000 each year to your child and his/her spouse and avoid any hard feelings if the money isn’t paid back.

There is one advantage to treating the money as a loan—you get to write it off as a bad debt if you don’t get paid back. However, in addition to the resentment you will probably incur, you’ll need to keep careful records to prove to the IRS that you tried to collect before you can claim the deduction.

43%—Percentage of American families that spend more than they earn each year.(MSN Money, 2008)