More executor questions...

[AmICrazyorWhat2]

Another poster is asking about acting as an executor for a parent's will, which is prompting me to ask about other people's experiences of being executors and handling monies owed to the estate.

Long story short, DH is one of his Dad's executors, along with another sibling. FIL has lent money to all his children at one time or another, mostly to help pay for university as it's v. expensive here in the USA.

He keeps meticulous records and as far as DH knows, all have repaid him completely except for one sibling - who's borrowed even more. This sibling has previously said that they'll be paying Dad back forever" so DH guesses we're talking many thousands.

The estate will be split equally between the siblings and to do it fairly, DH and the other executor will have to take these debts out of her portion, which could be v. awkward.

Has anyone else had to do this and did it cause family ructions? Poor DH hates rows, but if this sibling really does owe the estate thousands, how else can the executors divide it fairly?

I'm only asking because FIL is nearly 80 and DH will probably have to address this in the next few years.

Will the sibling owe more to the estate than what her share would be? Could you clean the slate and she gets nothing?

I would ask FIL what he would want DH to do with the sibling's debts. On his passing he may want it to be written off as a gift. Whatever FIL's decision is at least will be acting on his direct (and written) instruction.

I think it would only be fair if debts came out of their inheritances. She would have known that was going to happen, surely?

I have no idea what she currently owes and DH isn't comfortable asking. PILs are comfortably off but they may need to pay for full-time care, for example, so who knows what the estate will be worth.

The real issue is how this sibling might react if told her debt has to be taken into account. In an ideal world, she'd recognise that it's completely fair, but she has a history of turning on the waterworks and making people feel bad. Poor DH wouldn't know what to do!

If your fil wants any existing debts taken into account then he needs to say so in his will. Executors have to follow what's set out in the will - they don't get to decide what's fair or not.

In case anyone's wondering, we do care about her and want the best for her. She just tends to get emotional and everyone caves in.

Again, DH doesn't feel comfortable asking his Dad about sibling debts, etc. They never talk about money or anything related to other family members. It all gets swept under the carpet...unlike my side who discuss everyone

DH and his siblings are going to have to have the conversation with FIL.

Nobody wants to talk about these things, but surely doing what his dad wants is more important than an awkward conversation? And it will be easier to deal with the in debt sibling when the time comes if he can say “this is how Dad instructed me to do it” especially if he can get it in writing.

FIL needs to leave documentation, about debt repayment. Frankly once he's dead, if there isn't a paper trail there is nothing to stop SIL from saying she's repaid it anyway/it was a gift. You'd never be able to prove differently.

It also depends on how much is owed. For arguments sake - lets say FILs estate is worth 500K and SIL has borrowed 20K - it really isn't worth the fall out is it?

But you know FIL is not going to leave a paper trail - if he wants to square it off he needs to bequest to 20K to each of the children who don't have an out standing loan, then divide equally the remainder between all 4. If that isn't dont and it simply says equal division between all 4, she could have a legitimate case to disagree with the executors

He doesn’t need to ask for details. Just “we know X owes you money, if that’s still the case when I’m acting as executor, do you want it written off or counted as part of their inheritance”

Step 1 - Add up all the other net assets in FIL estate "X" including the debts "Y" = "Z"

Step 2 - Take "Z" to give a notional estate figure and divide it by the number of beneficiaries ie if three then "Z"/3" = "K"

Step 3 - Allocate "K" to each beneficiary then deduct their individual share of "Y" to find their net inheritance.

This is assuming the Will leaves assets equally and there is no dependent spouse etc.

Surely debts won't come into the division of the estate unless specifically mentioned in the will? If FIL didn't make a legal agreement with her about repayment, and she hasn't, then I guess it just gets written off. Not necessarily fair but if there's nothing in writing about it...

I am in the same boat (Executor), younger parent so hopefully many years left. My sister recently got a chunk of money to buy a flat which my DM said she may as well have now, as opposed to having to wait for her to die.

My brother and I are executors of the will, which I have read. Same sis a bit of a weeper and wont read the will as it's 'mobid'. FFS, my mother just wanted us to know the layout. As it turned out one of my brothers has also had part of his inheritance and was only going to get a sum of money rather then a quarter of the pot so to speak.

I got my mother to change this so we all get the same. When she goes I will have no parents left, Dad already gone. The last thing I would want is to fall out with my siblings over who got what. We are all comfortable and will be made more so on my mothers passing.

Good suggestion to ask, I will find out what my mother wants done about the money given to my sister. It is after all still my mothers money and she can do what she likes with it.

The father needs to be clear that money owed is a debt not gift. If he wants the money owed to come off what her share would be he needs to make this clear in writing, showing total amounts owed, method of repayment and balance on his death to come out of her share in the estate.

Debts are assets of the estate Buttery muffin so they are added in.

The father needs to be clear that money owed is a debt not gift

No, he only needs to be clear if its a gift, not the other way. His meticulous records show the debts are not gifts.

@Ginmakesitallok

Believe me, DH would much prefer to divide things equally and be done with it - he's just got a nasty feeling that the debt is pretty large. His sister's in a good professional job and she still says she's going to be paying it back "forever."

As executor, he'd then have to tell his other siblings that although they repaid their Dad every penny they borrowed, hers can be ignored....

I think he's going to HAVE to ask FIL to put more guidance in his will. Thanks all.

I'm not sure about the tax law in the USA, but in the UK if large gifts were made in the 7 years before death then they may be liable for tax (at a sliding scale, depending on when they were given).

So we had to go back 7 years to see if there were any gifts to anyone. There was. The estate paid tax on it as a result - I suppose we could have taken it off the receivers but it was decided not to. But tbh, that does reduce the estate for everyone else if you've paid a lump of tax liability out of it before dividing it up.

We did assume they were gifts though and this clearly seems to be a loan so I would get that in writing.

If it sounds as if they're all money-grabbing, they're really not, and don't expect anything from their parents. DH wants to get things in order now because he witnessed a feud among other relatives about an estate. It's caused years of ructions and I still don't think two of the siblings are speaking. It's horrible and ridiculous.