Seven Questions About Loans, Gifts, and Orange County Estate Administration

While the majority of people preparing their estate plans are focused on transfers of assets that occur after death, it is also common for parents or grandparents to want to make funds available to their loved ones while they are still living. Perhaps a child needs money to purchase a home, attend a graduate program, or start a business. Regardless of the reason, when transfers are made during life, unique considerations must be made when the time comes to administer the trust or estate in Orange County.

As an executor or a trustee of an estate or a trust involving a pre-death transfer to a beneficiary, several important questions should be considered. These questions include the following:

  1. Was the pre-death transfer intended to be a gift, or was it to be paid back and treated like a loan?
  2. If the transfer was intended to be a loan, did the parties execute a promissory note?
  3. If the transfer was intended to be a loan, what was the interest rate?
  4. Were similar transfers made to other beneficiaries?
  5. Was the gift or loan addressed in the terms of either the will or trust?
  6. If the transfer was intended to be a loan, do the terms of either the will or trust forgive the repayment?
  7. Do the terms of the will or trust otherwise address the loan or gift?

The answers to the above questions will help guide the executor or trustee as he attempts to administer the estate. Since pre-death transfers may trigger certain tax consequences, it is important that the fiduciary also consult with an experienced trust administration attorney. For example, if the transfer was a loan, the amount owed might be included in the calculations for the taxable estate. To learn more about administering estates and other common questions, sign up for our free newsletter. 

James F. Roberts
Founder and owner of the Law Office of James F. Roberts and Associates, a premiere estate planning law firm