Should I Lend $50,000 to My Brother-In-Law?

Is it possible to lend money to family without it affecting the relationship for the worst? Plus, what to do in case of a banking error in your favor.

Helping a relative in this way is compassionate, but it will indeed affect your relationship if the loan sours (and even if it doesn't). There should be a written agreement on repayment, which should start when your brother-in-law has income again. If you fear that he won't manage a lump sum wisely, you could advance him and his wife the money gradually -- perhaps a monthly amount that would cover their home and car payments and some other essentials.

Another approach: Make gifts instead of loans. You and your wife can each give to each of his family members up to $13,000 a year with no tax consequences on either side. Tell him you have no expectation of repayment. You might be surprised that he gives some of the money back to you when he's able, out of pride and gratitude.

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Knight Kiplinger
Editor Emeritus, Kiplinger

Knight came to Kiplinger in 1983, after 13 years in daily newspaper journalism, the last six as Washington bureau chief of the Ottaway Newspapers division of Dow Jones. A frequent speaker before business audiences, he has appeared on NPR, CNN, Fox and CNBC, among other networks. Knight contributes to the weekly Kiplinger Letter.