Paying sibling half of what parents gifted, plus interest

KezJH100824

Help and opinions needed please on a family financial dispute.
In 2003 my partner was given £17,000 from her parents as she needed it at the time. It was never suggested it was a loan or the amount needed to be repaid. Because her parents didn't have the money at that time to also give £17,000 to her brother, they wrote in their will that he would receive £17,000 more in the inheritance.
Her brother is now struggling financially so she would like to even out what her parents gave her by giving him £8,500 (half of the original £17,000, so they've had half each). The extra that was set aside for him in the inheritance would then be wiped out and everything would be 50/50.
He is more than happy to accept the £8,500 but now wants my partner to pay him interest.
1) Is she legally obliged to give him interest? She recognises that her 'assets' have benefited from that money since 2003.
2) If she should give him interest, how should this be worked out? We're thinking it should be compound interest on £8,500 (as if that money had been sat untouched in a savings account since 2003). Her brother has mentioned inflation AS WELL as compound interest.
3) If she agrees to pay him the £8,500 plus interest, should she get him to sign a declaration that it has been dealt with in full and final settlement? Should she also ask her parents to agree that their will should be amended so he isn't due any extra inheritance than her?
Would appreciate any advice... thank you in advance.

MovingForwards

1. No, not even obliged to pay half. If OH does, the parents need to update their wills as brother will demand what's written in the will.

2. See 1 above.

3. See 1 above.

theoretica

Worth looking at it with real numbers - RPI increase alone would bring it to about 13500.  Interest (as though he had the money back then) OR RPI seems fair to me personally - and depending on how long the parents live may well be a better deal for the brother than an flat 17k in the future!

Yes, the parents would need to alter their will.

xylophone

1) Is she legally obliged to give him interest? She recognises that her 'assets' have benefited from that money since 2003.

She has no obligation whatsoever in this respect.

She has no obligation to share the gift now.

She can choose to do so but either she then asks the parents to change their wills or she sets up a formal witnessed and dated agreement signed by her and her brother that the clause in the will is either disregarded or varied.

gettingtheresometime

This has so much potential for arguments that if it were me I would suggest to the brother that I lent him the £8,500 with the loan documented that it was to be repaid when he received any inheritance.
That way it keeps it straight forward and it doesn't involve the parents having to change wills etc.
If, on the off chance that there is no inheritance, the OP's partner can always write off the loan and if she so wishes make a further payment to take into account any interest she may feel he's morally owed.

mason's_mum

KezJH100824 said:

He is more than happy to accept the £8,500 but now wants my partner to pay him interest.

I bet he is - to be honest he seems like a piece of work. In his position I'd be grateful someone was willing to help me out at all, let alone demand extra! what's to say he wouldn't have wasted it if he'd received it in 2003?
Would he have demanded interest on the £17k from the estate?
Can the parents not afford to help him out in the same way they did your OH?

pattycake

Your partner sounds like a lovely caring person but the brother sounds just the opposite.  The fact that she’s willing to help him should be sufficient and asking for interest is just plain cheeky.  In her shoes, I would rescind the offer and let him wait for his inheritance.

KezJH100824

Thanks for all the replies so far - it's really useful to get independent and objective opinions and advice on this.

KezJH100824

mason's_mum said:

Can the parents not afford to help him out in the same way they did your OH?

Unfortunately they're not in the position to gift him anything, let alone £17,000. 

One of the reasons my OH wanted to split her gift with him now is because realistically there may not be any money left in their parent's estate, especially if money has to be used for care costs. You just don't know what's around the corner do you, and she didn't want her brother to miss out.

I do believe that she isn't legally obliged to a) share her gift, and b) give him any interest, however, she's a 'good egg' (sometimes a little soft) and wants to try and keep the peace and avoid a family feud. I'm a little less trusting of people (once bitten, twice shy) so think she should sort this now and get something in writing so nothing can come back to bite her in the future!

zagfles

If you want to be "fair" in terms of the value of money from the parents, then you could use an inflation index chart like this

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/chaw/mm23

to see what £8500 in 2003 is worth now.

If you hover over the graph in at 2003 the index is around 181.2, and now it's 292.7, so £8500 in 2003 is now worth 292.7/181.2 * 8500 = £13730

Or you could use CPIH which will be less, about £12041

https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l522/mm23

It's ridiculous to ask for interest plus inlation, interest rates are nominal not real. Basing it on interest would be hard, rates change all the time and what rate would you use? 

Socajam

I would tell the brother he either gets a loan from the bank or wait until the parents die
Right now it's the parents money to do as they wish and it seems as if his greed is getting in the way of rationale thinking.
I wish parents would stop telling children that this is yours when I die etc. It only creates a lot of problems later on when the greed sets in.
He in not entitled to any interest because it was not his money, it was their parents money and until or unless they ask for interest, the brother can go take a hike.
Your partner is enabling him by agreeing to this, tell them to stop and no more talking about it.