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socrateaser
socrateaser, Lawyer
Category: Legal
Satisfied Customers: 37960
Experience:  Retired (mostly)
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1. can i use my house to be collateral, to do a personal

Customer Question

1. can i use my house to be collateral, to do a personal loan from family member?
2. Can my family member enforce the personal loan legal form?
3. If I can't pay for the personal loan, could they really take my house?
4. The family member is only 3 years old (but the legal guardian) will be the one who is going to sign the legal forms, does the 3 years old need to file tax?
5. Does the legal guardian need to pay tax (even though it's not his money)?
6. Can I deduct the personal interested that I will be paying in my tax?
Submitted: 9 months ago.
Category: Legal
Expert:  socrateaser replied 9 months ago.

Hello...you asked:

1. can i use my house to be collateral, to do a personal loan from family member?

A: Yes, you can give the family member a promissory note and deed of trust to secure the note to the house.

2. Can my family member enforce the personal loan legal form?

A: Yes.
3. If I can't pay for the personal loan, could they really take my house?

A: Yes, if you give them a deed of trust to secure the loan.
4. The family member is only 3 years old (but the legal guardian) will be the one who is going to sign the legal forms, does the 3 years old need to file tax?

A: No. The family member can add the child's interest on the family member's tax return.
5. Does the legal guardian need to pay tax (even though it's not his money)?
6. Can I deduct the personal interested that I will be paying in my tax?

A: Yes, unless the amount of the interest is greater than $100,000. If greater, then you cannot deduct the additional interest amounts.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, the website retains your entire payment, and I receive nothing for my efforts in your behalf.

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Customer: replied 9 months ago.
1. Can I get a personal loan without interest? Is that legal?
2. If something happen to me (like if I die) and I have $100,000 personal loan to a family member. And if they had to sell the house because it's the collateral and let say they got $150,000 for it. (The house was originally purchased for $50,000, so the gain on the property is $100,000) So if my defendant sold the house for $150,000 and paid the personal loan $100,000. Does he need to pay the gain tax from the $100,000 profit?
Sorry if that's a bit confusing. I was told if you have a loan out upon your death then you just have to pay gain tax after you pay off all the outstanding loan.
Expert:  socrateaser replied 9 months ago.

1. Can I get a personal loan without interest? Is that legal?

A: Yes, but the IRS will "impute" interest on the loan to the lender, if the lender is discovered to have failed to charge fair market interest on the loan.
2. If something happen to me (like if I die) and I have $100,000 personal loan to a family member. And if they had to sell the house because it's the collateral and let say they got $150,000 for it. (The house was originally purchased for $50,000, so the gain on the property is $100,000) So if my defendant sold the house for $150,000 and paid the personal loan $100,000. Does he need to pay the gain tax from the $100,000 profit?

A: If they are the property owner, then there would be no taxable gain, unless the profit is greater than $250,000. And, at your death, the family member would get a "step up in basis," to fair market value. This typically makes any subsequent sale tax free.
Sorry if that's a bit confusing. I was told if you have a loan out upon your death then you just have to pay gain tax after you pay off all the outstanding loan.

A: See above.

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer -- otherwise, the website retains your entire payment, and I receive nothing for my efforts in your behalf.

Thanks again for using Justanswer!

Customer: replied 9 months ago.
profit of $250,000?Personal upon death Loan: $2,000,000 (unpaid)
Property upon death Value: $2,250,000 (SOLD after death)Would that mean you don't have to pay for any Gain Tax?
Expert:  socrateaser replied 9 months ago.

Correct.