I am sure you're saying, "Now, why in the world would I want to file a lien against my own child? I trust him/her. We are family."
It isn't as crazy as it sounds. I will explain the logic behind this to help you to understand why this is an important step to take when you loan money to your children/family member/friend.
Filing a lien when your child/family member/friend borrows money to buy something like a house, car, or for purchasing equipment or other assets to use in their business can protect the asset and both parties. How?
If you loan someone money and do not file a lien, the loan is unsecured. If your child/family member/friend gets behind with the IRS or other creditors, they can put liens on the asset This means the IRS, or creditors, are in line first to get the asset. Now the asset is gone and, more than likely, the chance of getting your money back. Not a good situation.
If you had filed a lien when you loaned the money, you would have been first in line to protect the asset as well as the person who borrowed the money from you. Basically, you become a friendly creditor that is first in line.
But, you must do this properly. You are going to need to hire a lawyer. (I heard your groan) Keep in mind the hundreds you spend on a lawyer will protect your thousands you are loaning.
Now can you see the logic behind filing a lien when anyone borrows money from you?
If you have questions about this concept, please feel free to contact me at 702-469-9426 or cstevens@numbercruncherllc.tax. I help taxpayers in the Las Vegas, NV area, State of Nevada, St. George, UT and nationwide who have IRS issues.
