Lending money to sibling

boldaslove

Hi all,

My sibling and I have a good relationship and although we don’t get to see each other as often as we’d like (we live at opposite ends of the country) we speak regularly and are on good terms. Several years ago our mother died unexpectedly - to cut a long story short we had to sell her house to pay off the debts she left and we split the remaining money equally between us.

Some relevant backstory:

I’ve since stuck my share of the money in various savings/bonds accounts and I’m now going to use the majority of it to purchase my first home with my partner, with some left over as savings for retirement and a safety net. It’s been a tough year for my partner and I : COVID essentially meant I was redundant in 2020 as I’m self employed and work in the events industry which all but collapsed last year. Work is slowly crawling back now but is very uncertain, to the point where I’m applying for salaried jobs in other sectors in order to ensure some security for us. Additionally my partner had a health crisis before Christmas last year and had life-changing emergency surgery. They’ve been on long term sick ever since and are only just returning to work now, plus they’ll need another major operation in the future which will require further time off and we won’t know when this will be. We’ve been living with my partners family for the past few years while we prepare for buying our house and we live pretty frugally.

My sibling is married with a young child. Both they and their spouse have good stable jobs and are comfortable as far as I know. They own their home, have 2 cars which they change up fairly regularly, are always getting work done to the house, they can afford decent food from places like Waitrose and are often buying their child expensive toys and games. No criticism from me here; they’re entitled to live they way they like and I’m happy for them. My sibling called me recently to say that they’re fighting daily with their spouse and fear they’re on the brink of separating, that their child is present during arguments and is crying and getting distressed and that they have no support from friends or family nearby.

The dilemma:

They’ve now asked to borrow a significant amount of money from me to pay for some essential works on the house - apparently they miscalculated how much money they had in their savings account to pay for the work and don’t want to tell their spouse as they fear that will end the relationship for good. I obviously don’t want this to happen but it’s not small change they’re asking for - it would have an impact on my safety net and savings for the future especially if they didn’t pay me back. I discussed the situation with my dad who suggested we split the amount between us, with my sibling prioritising paying me back and my dad treating his as a gift. This would be more comfortable and I don’t need that amount of money immediately so I was ok with doing this, however on reflection I’m a little worried as I recall my sibling borrowed money from my mum on several occasions in the past and I don’t think they always paid her back. She actually spent way beyond her means on my siblings wedding and racked up a pretty big debt which we only uncovered after her death. They didn’t make her do this, but I think the expectation to contribute was always there.

I want to help them and I’d like to think they would help me out if I was ever in a difficult situation, but I can’t help feeling uneasy at lending such a large sum when a) I’m about to make the biggest purchase of my life b) it involves concealing financial matters from the rest of the family (only my dad, my partner and I know) and c) their track record with borrowing isn’t that great. I’m already stressed about mine and my partners future without adding money worries with family into the mix, but I think I’d be even more worried if I didn’t help them out. They’ve told me they can pay me back monthly but if this didn’t happen it’d just make me really sad. I discussed this with my partner who said they’d support my decision but they’re obviously concerned it might affect the relationship and they’re quite rightly wondering where my siblings’ share of the money has gone. 

Any thoughts, experiences, advice? Part of me thinks that if you have the money you should help friends and family out, but common opinion seems to be to only lend money out that you don’t mind not getting back. I could deal with not getting my share back but I couldn’t deal with the mistrust and sadness that came with that especially considering we’ve already suffered such a huge loss in the family. 

elsien

The bottom line is only lend it if you can afford to lose it.

Even if you have a formal loan agreement (which you should have for a significant amount of money) you face having to take her to court to get it back if she doesn't pay, and then if she had no income there are still no guarantees. Which is not going to be great for family dynamics.

If the relationship with the partner is so rocky, you also need to consider what will happen if they split up and the house has to be sold - that will affect your sister's ability to pay even more.
And as part of your decision making, I don't think you'd be out of order to ask her where the money she's already had went to. It's one of the risk factors you need to bear in mind.  They would appear to have enough money as a family to make some cuts if they need to - no reason why they shouldn't do that instead of borrowing from you. 

Think worst case scenario then decide if you can live with that or not.
From what you've said, I'd be firmly in the "no" camp. 

RAS

I'd suggest your sibling goes over to the debtfree forum on MSE and put's up a statement of affairs. Folks there are pretty good at working with posters to identify problems. 

The stark fact is that if your sibling is going to repay you, then their capacity to spend on the stuff they've been used to buying is going to suffer and will be noticeable to their spouse. So sooner or later questions will be asked.

Then it will be awfully tempting to pretend everything is OK and stop paying you so they can cover up the cover-up.

Your sibling needs budgeting advice from folk like the MSE crew and then to 'fess up to their spouse when they've got a solution. Of course the whole relationship could go pear-shaped but it sounds like this couple aren't good about talking money to each other, alongside any other issues.  And they'll only survive long term if they start to communicate better.

Mojisola

boldaslove said:

I’ve since stuck my share of the money in various savings/bonds accounts and I’m now going to use the majority of it to purchase my first home with my partner, with some left over as savings for retirement and a safety net.

We’ve been living with my partners family for the past few years while we prepare for buying our house and we live pretty frugally.

My sibling is married with a young child. Both they and their spouse have good stable jobs and are comfortable as far as I know. They own their home, have 2 cars which they change up fairly regularly, are always getting work done to the house, they can afford decent food from places like Waitrose and are often buying their child expensive toys and games.

They’ve now asked to borrow a significant amount of money from me to pay for some essential works on the house

it would have an impact on my safety net and savings for the future especially if they didn’t pay me back.

In most cases I would be more than happy to help out but,  based on the way they are with money, I wouldn't risk my future financial security by lending them money.

The couple sound as if they haven't made any provision for their own safety net but are living up to (and beyond) their income - not wise.

boldaslove

elsien said:

If the relationship with the partner is so rocky, you also need to consider what will happen if they split up and the house has to be sold - that will affect your sister's ability to pay even more.
And as part of your decision making, I don't think you'd be out of order to ask her where the money she's already had went to. It's one of the risk factors you need to bear in mind.  They would appear to have enough money as a family to make some cuts if they need to - no reason why they shouldn't do that instead of borrowing from you. 

I think the trouble lies in the fact they apparently can’t talk to their spouse about this, which seems crazy and ill-advised to me. And this is speaking as someone who recently made my own financial whoopsie -thankfully before any money changed hands so no harm done apart from to my pride. I had to own up to my partner, it was an awkward conversation and I was upset about it but we figured it out. I don’t think any good can come of lying about financial matters to your SO. And I’m not exactly on close terms with my in-law but I’d feel pretty weird about concealing this from them and my dads partner who I do see regularly and get on very well with.

Sea_Shell

It's not on you to "fix" their problems, either in their relationship or their finances.

I wouldn't lend.   

I'd offer to help them with a budget, if they'd accept help, or maybe direct them here*.   If they won't and don't want to be open to you about their position, then that would reinforce my decision not to.

If they were fully on board with a budget, and the numbers stacked up, then I might reconsider, possibly, to lend some.


* There is a small risk they'll see this thread, mind.

RAS

Obviously there's no way to know whether your sibling is profligate, or in a financially abusive relationship or somewhere else altogether; but it doesn't sound like this relationship has long-term legs if they can't be honest with each other.

Suggest they get relationship counselling urgently and once they can talk more easily to each other, your sibling needs to get the counsellor to help tell their spouse, in a safer environment. It may mean the end of the relationship, or it may make it work.

If they've had an honest discussion and you've talked to your in-law, then you and your dad can re-appraise the situation with your sibling and their spouse. Any repayment is more likely to stick if they are both on board.

k12479

boldaslove said:

They’ve now asked to borrow a significant amount of money from me to pay for some essential works on the house - apparently they miscalculated how much money they had in their savings account to pay for the work and don’t want to tell their spouse as they fear that will end the relationship for good. 

That sounds like a terrible basis on which to make a loan, without even considering anything else the OP has written. If the work is 'essential' then the couple need to deal with their responsibilities, if they can't then they really don't stand much chance. In fact, I'd liken this more to placing a bet than making a loan in terms of risk and likelihood of repayment.

gettingtheresometime

How do you miscalculate the amount you have in a savings account?

maisie_cat

In 1998 I loaned my brother some money to use as a house deposit at the same time as I bought my house, it meant that I needed a larger mortgage but I wanted to help him.
He sold that house in 2013, took the huge amount of equity and spent it on "stuff", he now lives in social housing and I'm still waiting for the money back.
Never loan what you cannot afford to loan and never put yourself at a financial disadvantage by loaning money to a sibling

Retireinten

OP, I honestly wouldn't lend any money unless you are prepared to write it off. If you really  need to explain why, it goes along the lines of:


'Our situation is that I have been effectively unemployed for the last year and my income is still really uncertain at the moment, my partner has been off sick long term and he has more surgery and time off from work in the future. If things settle down for us this money will help us to buy our first home. It's our safety net and we can't afford to lose it. So I'm not in a position to help you by lending you money but I can help you to... set a budget and pinpoint areas where you can save, get better deals, come up with a plan to explain this to your husband etc etc.... (fill in appropriate offer here)'



You should not be pressured to lend anyone money, no matter the story or reason behind it.  And certainly not with your own circumstances being so up in the air still. The past year has all made us appreciate just how important a decent sized emergency found is, please don't risk yours.


And if their marriage is in so much trouble already, your sibling admitting to a renovation shortfall is no more likely to end their marriage than hiding debt is...


And I second that the reason given for needing the loan doesn't up.  You may not be doing your sibling any favours by lending this money.