You’re Not Your Loved Ones’ Bank

Say ‘no’ to loan requests and protect your wealth—and relationships.

Some people may treat you differently when you’ve acquired substantial wealth. Chalk it up to human nature, but you might find an unusual friendliness mixed with the occasional request for funds—a loan, a gift, a pledge, or some other way to spend your money

Saying “no” is often the right thing to do. It’s natural to be sympathetic to a loan request from a family member or friend. But the exchange of money may alter relationships between friends and family.

Being a soft touch is hazardous to your wealth. The truth is, word gets out when you say “yes” to loan requests. Unless you take command of the situation, you are likely to repeatedly hear the plaintive, “But you did it for Joe…” Other guilt triggers are phrases like, “Do it for the kids” or “I just need a little to tide me over.” Often, it’s better to offer advice, form an action plan with your erstwhile borrower, and show financial support only after you see the plan yield results.

Loans to friends often turn into gifts. You can’t count on being repaid when you loan money to a loved one or acquaintance. Unrepaid loans result in hurt feelings that destroy relationships. In other words, a short, polite yet firm “no” is often the only way to preserve your friend’s dignity, and your own. It’s also a way for you to assert that you wish to be viewed as a person, not a money angel.

Giving is good when you call the shots. That means you decide how you want to deploy your wealth. You can set up foundations and trusts, plan bequests, and work out a giving plan to your favorite charities. When done properly, you can accomplish a lot of good while bolstering your estate and managing your tax burden.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.