Not many people are as lucky as Donald Trump, who recently revealed that he got a $1 million loan from his father early in his career. But parents can still offer their adult children a leg up by lending smaller amounts.
This week, the Republican presidential candidate explained that he had used the "small loan" — which would now be worth many times the original amount due to inflation — to start buying properties in Manhattan. Trump also said that he had to pay his father back with interest.
Charging interest is among the many tips experts give parents considering similar arrangements, but for amounts with fewer zeroes. A handshake and a check aren't enough to keep family relations intact — and stay on the right side of the IRS.
"It can be a great way for parents who are earning low interest to increase their return and for kids to get a lower interest-rate loan," says Mitchell Kraus, owner of Capital Intelligence Associates, a wealth management firm in Los Angeles. "But it needs to be well thought out."