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?

Well there is deprivation of assets to consider and if I need care one day it would be nice if I could pay for it. In the meantime we have given our kids money so the pot is reduced, if DH dies before me I will downsize and give them more but I don't want to be peniless. Obviously if I knew the date and if I needed care that would be a good answer.

It was a private matter between your sister and your late father, on his death it became a matter between her and his estate so she now owes the £17K to the estate. This figure should be included in the estate accounts as with the figures you have quoted it sounds like it will attract inheritance tax. Assuming the two of you have been left a 50/50 share of the estate then her eventual share should be £17K less than yours.

If you are the executor, you have a legal duty to the estate to call in all of the assets, and the £17k is technically an asset and should be included in the gross estate value for Probate.

Unless your dad included a clause in his Will specifying that any outstanding loan amounts be written off then it should be deducted from her share.

It's helpful that she's being upfront about it being a loan.

When you die someone will need to go through your bank accounts to work out where the money goes. If you don't want that to be your children you need to appoint an executor on your will and possibly leave your assets to charity.

This was in response to the poster who didn't want anyone to go through her bank accounts

I don't mind people working out where the money is going I just don't want them worrying about where it went. I mean I might want to have a gigolo for a few years if I'm a widow and who wants to find that out about their elderly mother.

This! Nobody's business what I've been doing with my money while I'm here. Once I'm gone my will stands regardless of what I'd done with my money during my lifetime.

Your best bet is to put a letter with your will or somewhere easy to find detailing any relevant information your executors will need to complete the probate forms. This could include a list of your assets such as property, savings, anything of value like jewellery or art would be good. A list of any outstanding loans you have. A list of any monies owed to you. A list if any gifts you have made along with the date they were made. The more information you include the less need there will be for them to start digging into your affairs. You will need to review it regularly to ensure its up to date. I'm grateful my late Mother was very organised and made it as easy as she could for my sister and I to deal with her affairs when the time came.

Fair or not what type of relationship do you want with your sister going forward?
when you add in the home value you are still getting a generous amount.
i think you’re being petty.

It was a loan. Deduct the amount from her share of the estate.

How would anyone be able to sort out your estate ?
You'd find it very difficult to function without a bank account.

That is what I'm doing, well except for the loans if people need it I will give it and I don't expect it back which saves a whole load of grief. Thanks for that.

I meant I'd close the ones I have, start new ones so it is a fresh start and whatever I've done in the past, toy boy/drugs/gambling, remains my secret.

Glad it isn't just me.

If this was my sibling, I wouldn't expect the money to be deducted from their share. I know my parents wouldn't want that. If they offered, I'd think they were being good about it. I certainly wouldn't fall out with a sibling over it! Especially given the fairly large size of the estate.

It is a requirement for probate and so a standard part of the process.

Any gifts over £3k a year within the last 7 years are counted as part of the gross value. The only way to ascertain this information is to go through bank accounts etc. Banks etc. will provide statements if requested.

This! Nobody's business what I've been doing with my money while I'm here. Once I'm gone my will stands regardless of what I'd done with my money during my lifetime.

This is how I feel too.

Family loans are often unofficial, more relaxed loans and it can be almost impossible to know what your Dad would have wanted: the loan enforced or forgiven on his death. For that reason, his will should be taken as the absolute sum of his wishes and not altered, except where the law dictates it must be.

Cash is wonderful isn't it.

@Iwasafool Cash is great but £20k is a lot of money that can be stolen or go up in a fire. It’s also being phased out.

Actually it is much more complicated than that and much more generous.

Yes you have an allowance of £3k a year, you can also give things like £5k if one of your kids gets married or £2.5k to a GC or £1k to anyone else on their wedding/civil partnership. Gifts to charities don't count. You can give gifts of up to £250 a year to anyone you like and as many people as you like as long as they haven't benefitted from one of the other allowances. You can give as much as you like to support someone's living costs as long as it is out of income.

So I've got 8 GC so I can get rid of £20k there, I can give what I like to charity, the money I give GC for their living expenses at university is also OK. The money I've given kids for their weddings was also OK but over 7 years ago anyway.

I suppose I should actually just chuckle thinking of how much fun someone will have sorting that lot out. I mean was that £750 cheque I sent to my niece all for her or was it £250 each for her and her 2 children? Or was I supporting her out of income.

What fun.

I don't think it is going to be phased out in my lifetime.

How would you know when to do it, you don’t know when you will due? Where would the money and assets go?

I've already said I wouldn't get rid of everything as I might need care and I need somewhere to live. I will keep it under the limit though and I'm already giving money to DC DGC and I will carry on doing that. I can do it all legally with the amounts you can give away and from income.

This. Also it’s quite a large amount overall including the house so I’m not sure I’d pick away at the relationship for 20k.

Your partner is right ! If your dad was worried about it he would have sorted it in life . Stop creating problems , you just lost your dad , is your relationship to your sister not worth more ?

Is the estate split evenly between yourself and your sister? If so, I think your share should be increased by £8,500 and her share decreases by £8,500. As the overall estate value will increase by £17,000, which splits between the 2 of you (or however the will states).