Charlotte had several grown children, and from time to time she would give the children money. Sometimes she called it a gift, but sometimes she called it a loan. A few of the “loans” were small, but sometimes they were $25,000 or more, such as when a child was starting a business.

Sometimes the children promised to pay the money back, but they didn’t say when. Sometimes Charlotte called something a “loan,” but it was clear she didn’t really expect repayment.

That all sounds innocent enough…but the fact is that gifts and loans like these can have important tax implications. Anyone who provides significant amounts of money to children or other family members should be sure to discuss the matter with an estate planner.

For example: If you give more than $14,000 in a calendar year to anyone other than a spouse, the excess might be subject to gift tax. While you might (or might not) owe anything that year to the IRS, the excess gift could affect your estate tax planning. So it matters whether something is a gift or a loan. If you want the IRS to treat it as a loan, you’ll probably want to be able to prove it was a loan…such as by signing a loan agreement with a repayment schedule.

You should also be aware that if you loan someone more than $10,000 and don’t ask for interest, the IRS can “impute” interest. It can then treat this imputed interest as taxable income.

Even with low interest rates, interest can be significant. Suppose a child borrows $40,000 at 4 percent simple interest. Over 15 years, that’s $24,000 in interest.

Now suppose that Charlotte dies, and one child discovers that another child received a $50,000 loan and never paid it back. The first child might demand that the second child repay the loan, or that the amount of the second child’s inheritance be reduced by $50,000. This could lead to family bitterness, and possibly even a lawsuit.

The bottom line: If you’re going to offer money to children or other family members, it’s wise to be clear about whether it’s a gift or a loan…and if it’s a loan, when you expect repayment and whether you expect interest.

Also, you should say in your will what happens if a loan hasn’t been repaid when you die. You can decide that the loan doesn’t have to be repaid, or that the loan amount will be deducted from the inheritance the person would otherwise receive, or some combination of the two. But the important thing is to be clear, so your heirs won’t be left wondering and won’t be inclined to squabble.