Inheritance when a sibling owes money to deceased parent

[JustSaltPlease]

Hi

My dad has sadly passed away a few weeks ago. He had around 20k in the bank which is being shared between the 4 children. No will.

However, one brother owed him 9k, and the other 2.5k.

What is the best way here. Surely what they owe should be considered dad's estate, and the whole amounts divided by 4. Siblings will still owe the other recipients then but this does mean the 2 brothers walk away without any cash. Am I making sense?

Oops!!!

I think it's Gasp0de's scenario two that applies here, legally.

I think the only time the set off rule can apply is if a beneficiary is also a debtor to the estate. This lady is a debtor to the executor. I agree its a nasty thing for the executor to do but not covered by the law covering wills and intestacy. But yes I agree not the same and better on a different thread.

Yes its scenario two. The beneficiaries cannot treat the loans as gifts because the executor has proof that they were loans and its the executors duty, the beneficiaries have no choice. The executor must treat the loans as loans and require full repayment which may be managed by set off excpet in one case there isn't enough set off so the balsnce must be repaid. Once the estate has been distributed, the beneficiaries can do what they like with the money.

Taking sides or letting go of stuff isn’t up to op or any of the brothers. It is what the law states and that is interpreted by the executor of the will

Tell them they just got their or part of their inheritance early. Lucky them. So now the balance is being calculated accordingly.

Anything else is nonsense.

They didn't borrow off you. There is no reason to expect you to wait

well yes....but an executor needs to be careful about "interpretation" and stick to the letter of the law for their own safety. If things are so complicated that interpretation is required, I'd say its a job for someone leagally trained who will then be responsible if things go wrong.

Sorry this is utter nonsense in the uk - the loans are an asset of the estate and therefore they are due. This means that the total estate is £31.5k. Divided by 4 this is just under £8k each. This means that non debtor children get the full amount due, £2.5k loan child will get loan written off and in round terms £5.5k cash and £9k child will need to stump up circa £1k to fill the deficit caused by the balance of loan exceeding what they are due from the estate. This is of course assumes that we have a sensible family here. In all likelihood in my cynical mind unless there are written loan agreements what will happen is the 2 debtors will expect their loans to be written off AND get £5k from the estate. I am as I said being cynical about complete strangers and therefore no offence intended!

Op says she has proof they were loans

DB has already had the advantage of receiving his money early and shouldn't also have it written off. If that happened it's the equivalent of him taking money from his siblings not his parents. It's great that you have proof of loans and you should get what is rightfully yours.

I wonder how this will play out for me and my siblings. Our mum has been very generous with help over the years - I received £65k towards my house and £15k for car and new roof. I have a signed letter that the house money was a gift not a loan, but I had always intended to start paying it back once the rest of the mortgage was paid off. My middle sister has also received a bunch of loans for her house and to pay off debts, but those were always classed as loans. My youngest sibling as far as I know has received no aid but their in laws bought their first flat with their partner so they had help from the other side.

I suspect when my parents die all loans and gifts will be forgotten and the estate split three ways, but it doesn’t seem very fair to my siblings. I am the most financially hard up though so they will probably not question it. I feel guilty thinking they might resent me over it although money has never really been a subject of contention between us.

Personally I would say that if you and the other non-owing sibling agree, write off what is left of the 9k loan so that brother gets nothing if he still owes over 5k. 2.5 k gets 2.5 k, so their debt is now repayed, and you and the other sibling split whats left so getting about 8.7 k each.

I think the cost of a consultation and letter from a solicitor to this effect may be worth the money in the long run.

Quoting myself as I think I misunderstood.

So 9k is still owed by one brother
2.5 still owed by another

20k in the pot.

Brother one gets nothing
Brother two gets 2.5, which is is his quarter share minus what he still owes
You and non owing sibling spilt what is left between you.

Brother one continues to pay the instalments (although it sounds like he probably wont) until the remaining 4k is paid back to the estate which is then shared between the other three siblings.

The problem you have with the instalments thing is that if they decide not to pay there isnt much you can do about it without heft court fees and solicitors costs. At least this way you will "only" lose 4k instead of 11.5k if they dont make the payments.

I don't think the continue to pay thing can be done and any agreement to do any other thing that what the law decrees will need a deed of variation which costs money.

If there’s no will, your dads estate will be divided up according to the intestacy laws. If no widow, divided equally between the children. If he’d wanted it differently( for example because he had already given some children their share when he was alive) he should have made a will.

That does sound messy @Thefsm. Do you know why your Mum gifted you the money, but loaned it to your sister? I’m guessing there’s good reasons for it, but it does seem unfair.

My FIL always loaned money to his four children regardless of the circumstances, he’s very clear about that!

Completely wrong if there is legal proof (as in this case) that the money was lent not given.

In that case, the debt remains owed to the estate and must be paid by the person who owes it.

The fact that the person who owes the money also receives 1/4 of the total value of the estate (assets including debts owed) is completely irrelevant, except that the executor can choose to cancel out the debt (or part of it) with the inheritance.

She would have gifted it to satisfy the bank, as if it was loaned this would have affected affordability/meant she possibly had a claim on part of the house down the line.

If brother 1 made all the repayments in this scenario, he'd end up with less than the other siblings overall!

Why do so many people on mumsnet post when they have no knowledge or direct experience?

Of course it shouldn’t be written off. It is your money. You are entitled to a quarter of the estate. The estate consists of the cash in the bank plus the debts. Who is the executor? It would be a real pity if you had to resort to employing a lawyer as this would eat into the inheritance. You need to persuade your siblings that this is the right way to proceed.

I think the op said they are. The executor doesn't have to convince the sibs of anything, they must donwhat the law says which is the loans must be repaid. Can be offset against inheritance if possible but any that cant be offset must be repaid.

I know what the legal position is. The trouble is a legal position isn’t easy to enforce if you want to maintain family harmony. Believe me, I have painful experience. My comment about persuading the siblings was to avoid having to employ a lawyer which would wipe out quite a large chunk of the inheritance.

As executor the OP has no choice. Executors carry a personal legal responsibility to comply with the law. That compliance is the only way that an executor can protect themselves against being personally financially liable for any irregularity. I have also been there. As I see it the cheapest way for the OP to resolve this if the debtors won't agree would be to offset the debts against the debtors share of the inheritance and go through the small claims court for the rest. It may be that just stating that that is what will happen will be enough to encourage compliance. As for family harmony, the OP didn't wreck that, it went west when the CF siblings expected their debts to be written off.

Op in the absence of a Will who has taken on the responsibility of administering the estate ?