You want to help your children but you want to protect your estate tax exemption. Remember an individual can give $11,000 annually without gift tax liability. Your spouse can give another $11,000. This can be done each year. You can do this to as many people, related and unrelated, as you wish. Note that you can give me $11,000 a year gift tax free. You can loan $10,000 to a borrower without interest and there are no problems. You are allowed to make a loan up to $100,000 without triggering a tax bill for forgoing interest so long as your child does not earn more than $1,000 in net investment income (interest, dividends and short-term gains). If she does get more than $1,000 from investments, you will owe a tax on her total investment income up to the amount of the forgone interest according to the applicable federal rate. In no event would a penalty for a loan in excess of $100,000 be greater than the IRS imputing interest income to you on the amount loaned at the AFR. As of June 1, 2005, this would be at a rate of 4.8%. It changes every month. Do not rely on this without talking to your tax advisor.