Loan to family member

izoomzoom

Back story: My parent lent a substantial amount of money to her sibling 5 years ago. My parent has since developed dementia, which is now severe and the relative is probably heading the same way. I reminded relative of this loan, which they said they had no knowledge of, but are now accepting that they probably did borrow the money, after I provided them with a copy of the bank debit advice which said funds were a loan to help purchase a property.
Now, relative has agreed to draw up a 'repayment plan' document, so at least we have some written acknowledgement on the loan.
What do we need to include on this to make it legal? I recall a verbal convo with my relative where they stated they would pay £X interest per year, but I know interest rates have gone down over the years, and getting the capital amount is obviously my main priority.
(I'm thinking that property will have to be sold, so not expecting quick repayment, and both my parent and her sibling are elderly now).

[Deleted User]

A written repayment agreement is about as good as you'll get under the circumstances.

MinuteNoodles

izoomzoom said:

Now, relative has agreed to draw up a 'repayment plan' document, so at least we have some written acknowledgement on the loan.
What do we need to include on this to make it legal? I recall a verbal convo with my relative where they stated they would pay £X interest per year, but I know interest rates have gone down over the years, and getting the capital amount is obviously my main priority.

First of all unless you have power of attorney you have no legal right to act on behalf of your parent. Even if you did you can't make it legal. It is not legal to make up a retrospective loan agreement precisely because the lender could unilaterally choose to alter the original terms as you're intending to do with the interest and a retrospective one would likely be unenforceable. It should have been done in writing at the time the loan was taken out precisely because it means that things like the lender altering the interest rates or even putting one in where one didn't exist cannot be done further down the line once they realise they made a mistake with the original rate set unless it was written into the original agreement that the interest rate is variable and on what basis it can be varied.

You're already "recalling a verbal agreement to pay interest at £x per year" which may not actually have even existed except in your own mind and you've no guarantee that whatever you put in the agreement was the amount verbally agreed. Throw in the fact the borrower is now potentially suffering a loss of mental capability themselves, you're wanting them to sign an agreement you're creating as a third party who had nothing to do with the loan based purely on your own probably incorrect recollections and you've got a hell of a battle on should someone else decide to contest on behalf of the borrower what you've put in writing. The higher the amount owed, the bigger the burden of proof from the lender needs to be as once it gets above a certain amount it goes beyond the county court who set the bar for proof lower.

Without a loan put in writing at the time it is taken out any money lent to friends and family should be considered a gift you hope to be repaid. This is due to the fact that when you lend to friends and family there's usually no intention to create a legal relationship where you'll take them to court if they don't pay.

sourcrates

The poster above is absolutley correct, you cannot retrospectively piece together a loan agreement from a verbal conversation with a 3rd party, and expect to "make it legal" because you cannot do so.

You would need to have POA or a Deputyship in force, in order to even chase this, you would then have to issue proceedings, and you must have as much evidence as possible to back up your claim.

That would be under normal circumstances, add to the mix, the alleged debtor has dementia, which basically means they lack capacity to act for themselves, and your case just goes out the window i`m afraid.

This one is a lost cause.

MalMonroe

My parents always said that if you lend anything to a anyone - whether it's a relative, friend or an acquaintance, then you should consider it gone. Plus they said that if you can't afford to lose whatever it is you are asked to lend, then you have to refuse. If you are paid back, that's a bonus but generally, if you can't afford to lose it, do not lend it. 

I have to agree with sourcrates on this one, I'm afraid, lost cause. Your Mum is not in a position to remember, nor is her sibling. There's nothing underhand going on here, I'm sure.

You say, "getting the capital amount is obviously my main priority."

Why though?  The only beneficiary of any 'agreement' - which won't be enforceable now - will be you but it wasn't then - still isn't - any of your business.  

Time to let it go.  Not your money, not your loan, not your business. And also, not your inheritance, sorry to say.

Carrot007

MalMonroe said:

My parents always said that if you lend anything to a anyone - whether it's a relative, friend or an acquaintance, then you should consider it gone. Plus they said that if you can't afford to lose whatever it is you are asked to lend, then you have to refuse. If you are paid back, that's a bonus but generally, if you can't afford to lose it, do not lend it. 

I have to agree with sourcrates on this one, I'm afraid, lost cause. Your Mum is not in a position to remember, nor is her sibling. There's nothing underhand going on here, I'm sure.

You say, "getting the capital amount is obviously my main priority."

Why though?  The only beneficiary of any 'agreement' - which won't be enforceable now - will be you but it wasn't then - still isn't - any of your business.  

Time to let it go.  Not your money, not your loan, not your business. And also, not your inheritance, sorry to say.

Indeed, best advice you will get.

Neither party remember. It will just bring negative emotions to people ill equiped to deal with it. Unless she needs the money and some third party care provider is chasing it than let it go.

[Deleted User]

Family+money=disaster (everytime).

izoomzoom

Okay, I hear what is being said.
My relative is willing to put in writing that they owe this money. Surely a statement to that effect can be legal even if my parent is not a signatory to the statement. My relative is starting to forget things, but is in no way lacking capacity at this time.

sourcrates

izoomzoom said:

Okay, I hear what is being said.
My relative is willing to put in writing that they owe this money. Surely a statement to that effect can be legal even if my parent is not a signatory to the statement. My relative is starting to forget things, but is in no way lacking capacity at this time.

If the loan was made without any kind of credit agreement being signed or witnessed, then the money was a gift, its as simple as that.

When lending money to anyone, you must have a written agreement, or at least a letter, setting out what has been lent, over what period, how much interest shall be paid, if any, and what the monthly payments are to be, this should be signed by both parties, and ideally witnessed by a solicitor, or someone else of good standing, lack of an agreement or letter to this effect will render the transaction unenforcable.

As already stated, it cannot be done retrospectively, and most certainly not when one party is incapacitated, nor will an IOU suffice, you have no legal authority to make this person do anything, you are a 3rd party interloper in all of this, sorry but i cannot make it any clearer.

Mojisola

sourcrates said:

izoomzoom said:

My relative is willing to put in writing that they owe this money.

If the loan was made without any kind of credit agreement being signed or witnessed, then the money was a gift, its as simple as that.

I don't think that's right. 

When a relative died, the executors told the solicitor that other family members had paid for an operation for the deceased and that the money was to be repaid on the death.  The only paperwork was the receipt showing that the bill had been paid by the family members.

The solicitors said that as long as the beneficiaries declared that the debt to the estate existed, the money could be repaid.

In this case, the person receiving the money is willing to put in writing that the money is owed.

sourcrates

Mojisola said:

sourcrates said:

izoomzoom said:

My relative is willing to put in writing that they owe this money.

If the loan was made without any kind of credit agreement being signed or witnessed, then the money was a gift, its as simple as that.

I don't think that's right. 

When a relative died, the executors told the solicitor that other family members had paid for an operation for the deceased and that the money was to be repaid on the death.  The only paperwork was the receipt showing that the bill had been paid by the family members.

The solicitors said that as long as the beneficiaries declared that the debt to the estate existed, the money could be repaid.

In this case, the person receiving the money is willing to put in writing that the money is owed.

As i understood it, i assumed the OP was looking to take legal action to recover the loss, after a re-read of the original post it appears thats not the case, they are looking to recover it from their estate once deceased, which is an entirely different matter, and would depend on a lot of different factors.

If they left a healthy estate, then the executor of the parents will could put in a claim to their estate using what evidence they currently have, I am certainly no expert on these matters, but they would most likely take their place in line alongside any other creditor, if there is suficiant capital/assets, then fair enough, if not, thats the way the dice rolls unfortunatly.