Family loan dispute

jetsom

Hi, a bit new to forums, but after some advice concerning a family loan / gift.
We borrowed £40.000 of my ex wife's grandmother in April 1997 to use as a deposit on buying our first home. I prepared an agreement signed by her, my then wife and myself, the terms being that we would repay the money at £1,000 per annum with a 0% interest rate.with the provisos that on her death the money would be repaid to her estate within 3 months.
On the 1st anniversary of the loan I repaid £1.000, on the 2nd anniversary I went to pay the next installment, but was told " I don't think you need to pay any more". A little bewildered I didn't bother asking for the agreement to be altered or terminated!
Unfortunately she died 7 years ago and there has been no mention of her 'loan' by the executor of the will. I have recently divorced and all of a sudden the loan has become a point of conflict in settling our financial matters. My ex wife is insisting that I repay half the outstanding amount, she was fully aware of the conversation I had with her grandmother, although not present.
I have since obtained a copy of the Will, and there is no mention of a loan agreement, although the executor has one of the three originals of the agreement.
I have been trying to resolve our financial settlement for over six months, and I have still not heard from the executor of the will, am I being pressurized into repaying a gift or does my ex have a case?
Any help would be appreciated!
Thanks Jetsom

Gaz83

I would think you're stuck I'm afraid, unless you have something in writing from your ex-wife's grandmother confirming the loan wasn't to be repaid. Did your wife hear this conversation as well?

You're not being pressurised into repaying 'a gift', as you put it, as unfortunately you've no proof it's a gift. It will be your word against the executor, and as he's got a signed agreement confirming that it is a loan to be repaid, then I don't see you having any way out other than to pay it.

Pixie5740

The original loan was made in 1996

First loan repayment was made in 1997.

Second loan repayment was going to be made in 1998 but the OP's ex-wife's grandmother didn't accept the payment.

OP's ex-wife's grandmother passed away in 2007 so from 1999 to 2007 there has been no mention or attempt to repay the loan as it had been changed from a loan to a gift.

I think your ex-wife is at it. What happened to the house that the money was used to buy?

jetsom

Thanks to both of you for prompt reply.
Gaz83. No my wife did not hear the conversation as she was not present, she didn't even have the gumption to go with me when I asked her grandmother for the loan!
Pixie5740. The house is in the process of being sold, the proceeds to be split 50/50, Leaving approx £100,000 each. I also know that some of the 'loan' will go straight to my ex wife!

jetsom

Just a thought if death duties were paid on the 'loan' it would still be a loan, if she didn't it would be a gift? only if one could find out?

Pixie5740

Let's assume that despite the conversation you had with the lender, this is still a loan and not a gift.

I'm not quite sure if it's the same when you borrow money from family but if the lender had been a bank, the bank would not be able to legally pursue you through the debt, if after 6 years:

• They have not already obtained a CCJ
• You or any one else owing the money (say on a debt in joint names) have not made a payment; or
• You have not written to the creditor admitting you owe the debt.

There's more that 6 years between the last payment and when the lender passed away so could this debt be considered stature barred? (I don't know the answer, I'm just floating the idea).

TBagpuss

I don't think you owe anything.

The loan has not been demanded since 1998.
The estate didn't raise it and did not seek to recover it and it is over 6 years since then, AND (importantly) one of the executors knew of the loan.

I assume that there was only an agreement, nothing actually secured against the house, in which case, given that there has been over 12 with no attempt to recover the loan I think it would be statute barred.

Have you taken any legal advice about he divorce settlement - 50/50 may not be appropriate for other reasons, regardless of the status of the loan/gift.

Also - if it comes down to evidence. Grandma said you didn;t have to pay anything further. This is not just your word against your wife's, it is backed up by the evvidence that in the 15 years since she told you no payments were needed, you and your wife paid nothing and at no stage did anyone, grandma or her executors, sugest that you should. If you were paying £40K at £1,000 per year stating in 1997 then there would have been money outstanding when grandma died, and the executors whould have follwed up. IF they didn't, that that is their issue and your wife, if she feels she has lost out,, and assuming she was a beneficiary under the will, can make a complaint about the executors.

I don't think she'll get anywhere, because I think the loan would have been statute barred anyway by the time grandma died, but she can try.

jetsom

Many thanks TBagpuss, it sounds like I will have to appoint a solicitor. I will post the outcome when all is finalized as it may be helpful to others,
Thanks again all.

poppasmurf_bewdley

When amounts this size are concerned, it is always best to seek professional help rather than rely on us amateurs.

I would have thought the debt would be statute barred as it's longer than six years since a payment was made, but there again, your ex may be entitled to deduct the amount from your share of the house sale as, although a statute barred debt can't be claimed through the courts, it still remains and can be collected in other ways.

StirlingDave

I agree with everyone calling for you to get legal advice rather than online advice, as that's where you're likely to end up anyway.

However, I noted that you wrote:
"the terms being that we would repay the money at £1,000 per annum with a 0% interest rate.with the provisos that on her death the money would be repaid to her estate within 3 months"

I would make four points about this:
1.) Declining the £1,000 per year doesn't necessarily decline the proviso that it is eventually paid up in full. Perhaps she wanted the payments to feel that you were good for your word and would repay, so a year later she no longer needed that security (or have any need for the cash). That doesn't mean you no longer need to pay her back.
2.) If you do need to repay, you are in breach of the agreement if you didn't repay within 3 months. This probably means relatively little (as no late payment fees were agreed), but it might mean that if it's not requested within three months then the executors have missed their deadline for enforcing it. This is something only a qualified lawyer can advise on, who knows more facts than mentioned here.
3.) If the money is owed to the estate, then it's unclear to me how only part of the loan needs to be repaid. It sounds as if your ex-wife is saying that she doesn't have to pay as she's part of the family, but you do if you aren't any more. I'm sure there would be interesting inheritance tax questions around that sort of arrangement. Either you owe half of the money (£19,500) of which you and your wife own half each (or whatever divorce terms say), or you owe £39,000 of which you each are responsible for half. It doesn't sound like a legally sound approach to just determine on the fly who owes the estate money and who doesn't. Again, listen to lawyers with access to the information, not online advice on what might be true.
4) What happens to the house is entirely independent of what happens to the loan. As it wasn't secured (as far as I can tell) it's essentially a loan of £40k. If there was no condition that you repaid if you sold the house, then it's hard to see why it should be connected. Had the house been repossessed, for instance, that wouldn't have invalidated the loan.

longtermplanner

I agree you should see a solicitor if you are not happy about repaying "your half".

However I would just suggest that you consider whether repaying your half isn't the "reasonable" course of action. If the grandmother did intend the loan to turn into a gift, it was surely more likely to be a gift to your ex rather than to you. Why not just do the "right thing" and give your half back - it's not going to leave you broke - even if you aren't legally obliged to do this.