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?

No she won’t, it’s inheritance tax on the whole estate and, even then, it’s probably not even above threshold.

OP, if the executor of your DFs will is a solicitor, they will chase up any debts payable - this will include the money your DS received. The fact that some of the loan has already been paid shows that your DF intended for DS to repay the money.
Depending on how many benefactors are in the will, the amount your DS will end up losing will vary.
For example, on an estate valued at £400k in total (including the £17K) if the will states that £1000k goes to 5 named people, then the rest to be shared equally between you and DS, then you will each get half of £395K = £197.5K. Ignoring the £17K means you will get half of £383-£5K = £189K

So her share of the estate only needs to be reduced by 8.5k for her to have repaid the debt, she should pay it.

The way some families function is really beyond me!

YANBU, and I can't believe your sister isn't immediately saying "take 17k off because dad lent it to me".

You shouldn't even have to mention it.

When my mum died I owed her 8k we had 32k inheritance so I got 12 and dsis got 20.

Of course it should come off her share.

Interesting how different we all are. The sister wants £17k more than her sister. I think that's selfish. Her mother was presumably aware of her circumstances. If there had been a pressing reason for this sister to inherit more than the other, she could have adjusted her will or made this amount a gift. She didn't. So the £17k is an advance on her inheritance. This is beyond dispute. She's being very unreasonable not accepting it.

It's like a much magnified version of the MN staple - 'We went out for a meal and I had a plain omelette and a glass of water. My friend had three courses - lobster, steak, dessert - and a whole bottle of wine followed by coffee. She said we should split the bill equally. AIBU to say no?'

Of course it's an advance on inheritance if it was a loan and it's not repaid. It's as if she'd borrowed the mother's car or was living in her house and saying that's not relevant to the will because she did it before the mother died. This is why if inheritance tax is payable the executor or administrator has to confirm that no gifts were made in the seven years before death. If they were, some tax is payable on those as they are counted as part of the estate.

@CurlsnSunshinetime4tea are you the sibling? 😂

calculating half each that’s 17k is 10% of what each will get so I’d say it’s significant.

What has your partner got to do with it? Tell him to keep out of this. She owes his estate - that's all you need to know.

Just pay for your drugs in cash, problem solved!

All loans are paid back on death and the solicitor doing the estate will ask for it back just he or she would for any other money owed to the dead person

If sister pays £17k back to the estate, then estate is split equally, that seems fairer. Then it’s as if she paid back your dad?

Yes I'd open a new account but not every month. I don't think you've understood about privacy, I don't want anyone trawling through my history. I will be under the level for IHT so no one's business. From my research if your estate is below the limit you don't need to fill in any forms for tax just apply for probate.

If I die first DH will automatically inherit without tax, if he dies first 50% of what we owe will be distributed to kids and my estate will be below the limit so no need for any investigations. My income will be good so any further gifts/support will be from income so exempt.

So you should get £170k each?

At that amount, I’d let it go. I wouldn’t fight for the £20k, sorry £17k

@Dacadactyl The sister would be really daft to say 'take £17k off my share'. Assuming the estate is being divided equally in 2, half of that £17k would have been hers anyway.

Eg, using simple figures, a 100k estate divided by 2 = £50k each. If the sister only took £33k of the £100k (on top of the £17k already received) she'd receive a total of £50k, whereas the OP would receive £67k.

What should happen is that the sister takes £8.5k less than an equal split. Using the above figures as an example, the sister should take £41.5k (on top of the £17k already received) and the OP would be left with 58.5k, making it equal.

So if she paid it back that's £17k more in the pot so to speak

So are you saying you should be given £8.5k more then her

Keep it under what limit?

The IHT limit. Just get probate and move on, no falling out, one child not asking why the other child got x in y year, how awful to think your death is going to cause arguments about money. Is that all parents are now?

You'll be dead.
You wont have feelings when you're gone.

To the OP @blanketedbydust sister should pay in the 17k

At first I thought of course it should be taken off....

But the dad kept this private. He did not express a wish, or tell his lawyer, or put it in his will, or tell the whole family that this was an arrangement to be offset against inheritance. Neither, it sounds, did he say that to the sister- who seems to be honestly acknowledging the loan.

So.... he lent money, his money to his daughter.... when he was alive. His choice. Probably knowing not much would be paid back. And not making any effort to have it 'noted in the books'.

I don't think it's clear at all, therefore, that factoring it into his estate is anything he would have wanted.

It's not a big percentage of the estate. Unless she is stinking rich and you are struggling, (which seems unlikely if she borrowed this money) then I I would let it go. Respect your father's wishes of leaving the loan as a private affair.

I am very sorry for your loss.
Not a lawyer but I would imagine that if there is nothing in writing the only way to reduce your sisters share is if she does it voluntarily, either by a variation on the will (if there was one) or by giving you the money back.
I have recently been an Executor for my Mums will and I had to stick to what it said

The point is I have those feelings now. Would you advise people to not make a will because they'll be dead so it won't matter who inherits?

Not sure if someone has already suggested this but if your sister doesn’t agree to deduct £17,000 from her share of the estate, in order to balance the books so to speak, the alternative should be you are gifted 17,000 from the estate before it is split.

same outcome of course but good to share perspective with your sister and realise how unreasonable she is being.