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Attorneys

Ask the Experts: How Best to Handle Loans Between Family Members.

July 25 2012

This week, Sacramento estate planning attorney Kay Brooks answers readers questions in the Sacramento Bee column “Ask the Experts.”

Q: I have a rental property valued at $265,000, the mortgage balance is $151,000 at 5.75%. I’m considering a loan to pay off this balance from my father’s living trust account, which is in excess of $400,000. I am the sole heir and these funds are just sitting in money market accounts making .25%! I would set up documents for the loan for tax purposes pay the monthly interest to my father’s account at 2.00% with a 5-year payback schedule. If my father passed, how would these funds $151,000 which would be outside the trust be viewed by the IRS? Is there an amount of money that can be outside the trust without being subject to probate or tax? – Walt, Sacramento, CA

To read Kay Brooks answer, visit the Ask the Expert column here on the Sacbee.com