Judge Michael Corriero reveals some simple advice on how you can document a loan in case you ever lend someone money. Judge Corriero served on the bench for 28 years and was elected to the New York State Supreme Court. He's currently the cohost of "Hot Bench" and is the founder of the New York Center for Juvenile Justice. Following is a transcript of the video.
One of the most common cases that we see are cases involving disputes over whether or not money extended to a friend or neighbor was either a loan or a gift.
If you ask me, "What is important in order to demonstrate whether in fact it was a loan or a gift?" it is a documentation. It is written contracts, written understandings, even though it seems rather artificial to have that kind of an interaction with a friend or a neighbor.
We live in a very modern world. One way would be to send them a text. If the person who lent the money sent a text to the borrower and said, "Just so that I have this clear for my own personal records, my tax purposes, I lent you $6,000," for example, "and you agreed to pay me back in 3 months. Isn't that true?" or just, "Acknowledge that for me so that I have a record of it."
If you don't get an answer from the person then it could appear as if this was just a self-serving description of the event. And without an acknowledgment of some kind as to the accuracy of truthfulness of what was represented in the text it would still remain problematic.