Beneficiaries owing debts to the estate

Manxman_in_exile

Hi all


Hoping for some guidance on what ought(?) to be an easy problem.


My MiL died a few months ago. Her estate is to be divided equally between my wife (A) and her two brothers (B and C). My wife is the sole executor (executrix?).


Brother B had a loan from his mother of £5k and brother C a loan of £10k. My wife, A, had no loans. The loans to A and B will not be repaid, but presumably form part of MiL's estate.


We initially thought the outstanding loans to B and C should simply be deducted from their respective shares of the estate, but what happens to the £15k (10k plus 5k) left over? How is that shared out?


Our initial thought was that brothers B and C have benefited to a total amount of £15k that A(my wife) has not had the benefit of so that the £15k should go to her. But this doesn' seem right.


The alternative is that of the £15k, my wife (A) and brother B equally share the £10k portion lent to brother C, and then my wife and brother C share the £5k portion lent to brother B.


Hope that is clear enough for everybody to understand.


Any suggestions?


PS - Relationships between A, B and C are totally amicable and I'm sure will stay that way.

Flugelhorn

basically the loans are owed to the estate so if the current estate is 105k then estate with the loans paid back is 120K.

So each would get 120k divided by 3 and minus the loan:

A gets 40K - nil = 40K
B gets 40k-5K = 35K
C gets 40K- 10K = 30K

total paid out = 105K

warby68

I think the loans are added to the estate value and the total divided by 3.

Then the loan amount owed is deducted from that person's share.

Manxman_in_exile

Sorry - there's a typo in para 3 I can't edit.


"the loans to A and B should read " the "loans to B and C".

Dox

Happily it is an easy problem. Add back (at least notionally) all amounts owing to the estate; pay out any debts owed by the estate; then divide the resulting number by 3. If the two brothers don't physically repay the cash (and there's no need to, although it will need to be accounted for on any IHT forms), simply reduce the cash they receive by the amount of their respective loans.

Margot123

Is there clear documentary evidence of the loan, and does the borrower acknowledge the debt?

I ask this as I had quite task retrieving a debt from my Brother that he had owed to my Father's estate.

Manxman_in_exile

I can log in but can't post replies(!!!???)


Thanks to all who have replied.

Manxman_in_exile

Margot123 wrote: »

Is there clear documentary evidence of the loan, and does the borrower acknowledge the debt?

I ask this as I had quite task retrieving a debt from my Brother that he had owed to my Father's estate.

No problem I think. One of the loans is mentioned in mum's will and the other is clearly acknowledged. The three siblings get on well.

Manxman_in_exile

Flugelhorn wrote: »

basically the loans are owed to the estate so if the current estate is 105k then estate with the loans paid back is 120K.

So each would get 120k divided by 3 and minus the loan:

A gets 40K - nil = 40K
B gets 40k-5K = 35K
C gets 40K- 10K = 30K

total paid out = 105K

That's what we first thought but have overthought it.


Cheers

Manxman_in_exile

warby68 wrote: »

I think the loans are added to the estate value and the total divided by 3.

Then the loan amount owed is deducted from that person's share.

Thanks. As per my previous post.

Manxman_in_exile

Dox wrote: »

Happily it is an easy problem. Add back (at least notionally) all amounts owing to the estate; pay out any debts owed by the estate; then divide the resulting number by 3. If the two brothers don't physically repay the cash (and there's no need to, although it will need to be accounted for on any IHT forms), simply reduce the cash they receive by the amount of their respective loans.

Thanks. As per my two previous posts.