Should We Deduct Our Daughter’s Loan From Her Inheritance?

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Loaning money to your children, or giving them money, while you are alive is a way to help them buy a home, pay for college or get out of debt. In life and in death, parents don’t always give to their children equally, and it is not necessarily favoritism. Parents often give to their children on the basis of need.

If you loan a substantial amount of money from your estate, however, you could consider evening things out with the rest of your children by leaving this child a lesser amount in the will. In essence, they have pre-inherited their money. Consider the following example:

Joan and Bob have two children. They are in their 80s and will leave an estate of around $1,000,000. Split evenly, each child will end up with nearly half a million dollars. However, five years ago, they lent their eldest daughter and her husband $150,000 to secure a home. They expected to be paid back over 10 years, but haven’t been, for various reasons (illness, job loss, etc). Their estate is now worth $150,000 less and if they do not make changes to their will, both of their children will now receive around $425,000 – $75,000 less. Their son feels that he is being shortchanged, since he has not requested a loan from his parents.

In this scenario, Joan and Bob could put their daughter’s mind at ease and tell her that they do not expect her to pay the money back, but they will deduct this sum from her inheritance. She’ll receive immediate debt relief on her loan from her parents, while her brother will find equity restored to the inheritance split.

When contemplating inheritance changes, speak to an estate planning or elder law attorney. An elder law attorney can help you protect your finances and figure out what to do about this debt.

You can get referrals to the National Academy of Elder Law Attorneys at

About The Author

George Morris

In his 40-plus-year newspaper career, George Morris has written about just about everything -- Super Bowls, evangelists, World War II veterans and ordinary people with extraordinary tales. His work has received multiple honors from the Society of Professional Journalists, the Louisiana-Mississippi Associated Press and the Louisiana Press Association. He avoids debt when he can and pays it off quickly when he can't, and he's only too happy to suggest how you might do the same.