Tough love when grown kids ask for money
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In the case of the parent-child dynamic, parents can unconsciously use money to control their grown children and children can use continual requests for financial assistance as a way to avoid growing up and taking responsibility for themselves.

Frequently, financial gifts come with unspoken conditions, Jon Gallo says. He advises a couple to first talk out any request for money from their grown children. If they decide to give or lend money, make any conditions clear from the outset.

Yes or no
Handled correctly, either a no or yes in response to a request for money can enhance the relationship between a parent or parents and child. Handled incorrectly, the relationship between parent and child can suffer great harm. Parents should consider several factors as they deliberate.

Several factors parents should consider:

• Any financial history. What financial assistance have you provided to your children in the past? Has it been in the form of loans or gifts? How has the child used the money? • Siblings. How will your other children feel about you giving or lending money to siblings? Have you treated, or do you intend to treat them equally when it comes to gifting or lending money? • Conditions. Do you want to attach conditions to the gift or loan, such as what it can be used for? Will you make the gift or loan formally or informally?

Parents should discuss these issues together before reaching a decision, and may also want to consult with their financial adviser. Either way, parents should stay on the same page when it comes to the request as difficulties can arise when one parent doesn't want to provide financial help and the other gives money behind his or her back.

Gift or loan
Frequent financial gifts or continual support have the effect of creating and prolonging financial dependence on parents and can also bring parents to their knees financially. Klontz recalls a couple he counseled who were running through hundreds of thousands of dollars to support their three children in lavish lifestyles. Looking at the numbers, they figured that their original $11 million nest egg would be spent in a matter of years.

"After working with us, the couple were able to tell their children that they would stop their financial support within the next six months and that no further financial support would be given unless their financial adviser signed off on the request," Klontz says. "That way the kids had some time to deal with the change in circumstances and within a year or two had sold their expensive houses and moved into something more affordable."

Loans, when handled correctly, can work to the benefit of both parent and child. Dr. Glenn Whitman, director of transplantation at Temple University Hospital in Philadelphia, has lent money to each of his three sons through a third-party company designed to facilitate such services, Circle Lending.

Five years ago, his eldest son Arthur was in a bind -- his nonprofit, the Ghana Education Project, needed funds. Dr. Whitman wanted to help, but already had maxed out his budget for charitable giving for the year. So he turned to Circle Lending and with the company's help, devised a loan agreement that would help both parties. The experience was so successful that he repeated it when his son Nathanial needed money for a down payment on a house and his other son, Isaac, needed help with medical school living expenses.

"When you see your kids, you don't want to be saying to them, 'You owe me money,'" he says. "Circle Lending takes all of that out of the picture -- it prevents me from ever having to deal with it."

While many attorneys will draw up lending agreements between family members, Circle Lending will also handle the administration and collection of the funds you lend.

Advice and the actual drawing up of an agreement is available for a flat fee of $99 to $599, depending on the type of loan; servicing is $9 a month, according to vice president Jim Smith.

Lenders have lots of flexibility when setting terms -- they decide whether a grace period is permitted and are consulted if the borrower encounters a financial difficulty and can't pay. In such a case, the lender can decide to add payments on to the end of the loan term, forgive payments or take interest-only payments.