Redmond Office Law Blog

With the recent changes with local banks, including name changes as well as going out of business, many people are faced with new alternatives for borrowing money.  Most recently, our local community saw the takeover of Irwin Union Bank by another institution and for those individuals who had previously turned to Irwin Union Bank as their primary financial institution, may have to look elsewhere for something as simple as a loan.  The recession has brought many people to financial positions that had not previously anticipated.  In many situations individuals financial objectives have been modified or even compromised by a struggling economy and struggling banks.  However, for many of us life must go on and as young people marry, start families, buy houses or even start a business the need for financial assistance still exists.  Many of these young families or young individuals may be looking to the “bank of mom and dad”.  As many banks turn away young home buyers who may think for the first time they can afford a house at a reduced price may find that their lending institution has tightened their borrowing requirements.  Parents may ultimately be the lenders of last resort, but may be the only lenders available.  Many family members have found that the mortgage may exceed the value of their home and when faced with the need to sell the home find that their ability to sell the home and/or take a new job elsewhere is stymied by the ability to deal with the mortgage on their existing home.  In some situations parents are paying off home equity lines of credit and/or mortgages to help their kids take the next step in their life.  For some the loss of a job may present a need for financing or even the assistance with the start up of a new business.  What parents need to keep in mind is that when loaning money to their children there are certain IRS guidelines that need to be followed.  If parents are treating the loan to a child as more of a gift, then that parent may need to revisit their estate plan to ensure that when the parent dies the other children are treated equally or that other gifts were made to the remaining children to equalize everything in the end.