Borrowing against ones inheritence

welshwitch11

My brother and sister have both borrowed a significant amount of money from my mother's estate which is to be divided amongst 5 siblings. The estate is now going to fund my mother's stay in a Home and it is a good possibility that there will not be any money in the estate at the time of her death. Will my brother and sister then be responsible for returning that money to the estate? These loans are mentioned in my mother's will and the loans are to be deducted from the amount of their inheritence.

Mojisola

It doesn't sound as if they were loans but gifts which would be deduced from their eventual inheritance. If so, I don't think they will need to be paid back.

What may be more important is that your mother may be assessed as if she still has the money and so not entitled to have care needs paid for when her current cash runs out.

welshwitch11

The will actually says "I hereby release all persons from any outstanding loans or debts that may be due to me as at the date if my death such loans being subject to those incurred prior to 1st January 2000 and I hereby discharge and release my executors and trustees from any obligation or duty to recover such debts that may be outstanding in respect thereof." These loans occurred after Jan 1st 2000 and recorded by mother up until the time she handed over power if attorney."

dzug1

That's fine if there's no debts to be paid on death or enough spare cash to pay any.

I'm not sure she has the power to release her executors from the obligation to collect in assets that are needed to pay bills. Maybe she has, but I think you need expert advice as to whether that clause of the will is valid. If I were a creditor with a sufficiently large sum at stake I might well consider challenging the will.

daska

I see you're located in Canada, is your mum in the UK? I would strongly suggest that appropriate advice is taken in the relevant location.

Even if the loan doesn't have to be repaid their may be tax implications in the UK if the loan converts to a gift on your mother's death. IIUC the recipients could be chased for that if there are insufficient funds remaining in the estate to meet the bill from the taxman.

Mojisola

daska wrote: »

Even if the loan doesn't have to be repaid their may be tax implications in the UK if the loan converts to a gift on your mother's death. IIUC the recipients could be chased for that if there are insufficient funds remaining in the estate to meet the bill from the taxman.

If the OP's mother's money is probably going to be used up in care home fees, there shouldn't be any inheritance tax to worry about unless she gave away very large sums of money.

welshwitch - are the gifts in the range of thousands, tens of thousands or hundreds of thousands?

daska

Mojisola wrote: »

If the OP's mother's money is probably going to be used up in care home fees, there shouldn't be any inheritance tax to worry about unless she gave away very large sums of money.

welshwitch - are the gifts in the range of thousands, tens of thousands or hundreds of thousands?

You're 'probably' right LOL.

welshwitch11

I'm not too worried about the tax aspect of this at the moment. both my brother and sister have loans amounting to approximately $40,000.
My concern is, should the estate run out of funds and my mother is still in care (yes, she is in the UK), can the estate request that a) they repay the money to the estate to continue the care of my mother while she is still alive? After my mother's passing if all the money is gone then do they have to pay back the loans to the estate to be divided up between all the heirs? According to my mother's will everything is to be divided equally to all her children, therefore shouldn't those loans be paid back and become part of the estate?

daska

When payment becomes due will depend on the terms of the loan - was there a contract written up?

The clause you've posted implies that the money will still be considered a loan upon death - but until she dies that clause isn't valid, and there may be a stipulated period for repayment that has to be adhered to which means the estate won't receive the repayment immediately.

Is there any property involved? Could care fees be charged against the equity if the cash runs out? I don't think the LA will be very sympathetic if there are loans that can be called in but her attorney chooses not to do this.

welshwitch11

There were no contracts written up. That particular part of will was added in 2009 because of these two loans and my mother wanted to make sure everyone got their fair share. There is no more property as the house and contents were sold and the monies from the sales are now going towards her care since all her savings have gone to pay for her care to date. My concern mainly is the monies left in the estate now will run out eventually and as the care home is a very good home,I want to make sure that there will always be money to keep her there, after all it is my mother's money and not my brother and sister's.

daska

Then I think her attorney/s probably need to get specific legal advice. Without a formal agreement these may, as Mojisola pointed out, count as gifts. And getting the money back may require some expenditure if your siblings won't play nicely.