One of My Children Owes Me Money—How Do I Account for That in My Estate Plan?

Lending money to a child is common, whether it’s for buying a home, starting a business, or getting through a tough financial patch. But when it comes time to plan your estate, that unpaid loan can create real complications. Should you forgive the debt when you die? Or treat it as an advance on that child’s inheritance and reduce what they receive?

An estate plan will utilize two primary approaches to resolving these loans, and we’ll discuss the pros and cons to each. The first is forgiving the debt and the second is treating it as an advancement on the child’s inheritance. Each option has its own benefits, ranging from family fairness to administrative clarity. Join us as we explore how to handle loans to children within your estate plan, how to be fair to all your heirs, and how to avoid the conflicts and confusion that can arise when money and family mix.

Here’s some of what we discuss in this episode:

⚖️ The pros and cons of forgiving vs. equalizing through inheritance

📜 Why documentation and clarity in your estate plan are essential

🤝 Avoiding family conflict with open communication and planning

🧾 The importance of promissory notes and written records

0:00 – Intro

1:03 – Little league update

6:47 – Two main goals

10:52 – Forgiving the debt pros & cons

12:25 – Inheritance advancement pros & cons

16:08 – Options for accounting for the debt in your plan

21:10 – Most common path people choose