Sisters loan from dad and impact his estate

[blanketedbydust]

Hi,

We are in the process of working through my late Father's finances and estate.

It has come to light that our dad lent my sister £20k, £17K of which was still outstanding at the point of his death. There was no written agreement, however sister has confirmed that this was the agreement.

I feel that my sister's share of dad's estate should be reduced by the value of the debt and the money that she owed has effectively reduced his estate by 17K. My partner disagrees and thinks that it's nothing to do with us

Surely morally she should accept that her share of any inheritance must be reduced that that amount? AIBU?

Is your sister refusing to accept your point of view?

Yes, she feels it was a private matter between her and dad and that there was never any discussion or conversation regarding what would happen if passed before it was paid.

I agree with you—it is an outstanding loan, not a gift.

I mean, I guess it depends on the value of the estate. £17k of £25k is a whole hell of a lot more than£17k of £2.5 million…

Yeah what's the total amount here? If it was a lot I'd forget about the loan.

She’s not answering the question. Private or not, was it a gift or a loan?

She doesn't dispute that it was a loan.

The total value of his estate will be around 40K in cash and the value of his home which is around 320K

So she agrees it was a loan but disagrees that it needs to be repaid. Even though there was no discussion on the matter with your father? That doesn't make sense.

She should absolutely pay her debt to him or take it out of her share of the inheritance. Sadly this is why so many families become estranged after a bereavement. Money sometimes shows what people are really made of.

I'm a really private person, the idea of my kids trawling through my banking details to find out what I've spent money on or who I've given money to is really upsetting.

I think I might close my current banking and saving accounts and destroy all details of them. Would that stop anyone trawling through my business like this?

@Iwasafool is that a serious question?

Anyway, let's not derail the thread for the OP who's going through a grieving period.

That's part of the reason I want any details to remain private.

Yes it is.

When my mother died (I am one of three) I had an outstanding loan from her which had not been repaid - this was deducted from my share of the estate. Otherwise my share would have been larger than the will set out. Perfectly fair

Morally her share should reduce with the loan money however nothing in writing nothing you can do.

depending on when the loan was made, if she does not repay it I think it would count as a gift, which would attract inheritance tax

Theoretically the loan should be paid back as part of probate, it's part of his estate, so I agree her share should be reduced. Just because it was a private loan doesn't make any difference if she admits it is a loan not a gift.

Well your executors would need to establish whether or not you've made any 'lifetime gifts' in the seven years prior to your death as this can affect the IHT nil rate band amount available.

Why would you care anyway, you'll be dead?

Technically yes, her share should reduce. But is it really something you want to fall out over?

it's an asset of the estate, ie she owed your dad, and now his estate, £17,000. So if there's cash of £43,000 after paying for the funeral and outstanding bills, plus the house, £320,000, the estate is worth 320+43+17 thousand pounds, so £380,000.

You can knock £17,000 off her share when it's paid out so she doesn't have to produce the money but it needs to be taken into account.

So her unpaid loan is 5% of his entire estate.

Did he have a will?

Of course the outstanding £17k should be deducted from your sister's share. Are you the executor? If a solicitor were dealing with the estate I'm sure that's what they would say. She confirms it was a loan. If your sister has made some repayments she of course has the option to pay back everything she owes to his estate and then get her share, but that would a largely pointless exercise and presumably she doesn't have the means to do that.

Honestly the sense of entitlement is breathtaking. Maybe she thought that if she stopped repaying your dad he might let her have the rest of the money as a gift?

To the poster who doesn't want family rifling through her bank account - better spend everything now and keep things simple then!

We all have our hang ups and mine is privacy. If I choose to send money to a charity or help someone out financially (friend or family) or just blow it on something frivalous I think that is my business and I would hate people to be picking over my bones like this.

I think for me and DH we wouldn't be paying IHT as we gave our kids money over 7 years ago when they all married.

I am in the similar situation of your sister as in my mum leant me 20k which I am paying back. She was very explicit if she died before ot was fully repaid it was to be taken out of my " share" of the estate.

So I think it should be subtracted