Money Moral Dilemma: Would it be wrong to borrow from the interest on my sister's inheritance?

MSE_Kelvin

This week's MoneySaver who wants advice asks…

When our mother died, my sister didn't want her share of the inheritance paid into her bank account as she was concerned she'd end up living off it, so I paid it into a savings account in my name, on the basis that she'd let me know when she needed the money for something. In the meantime, I've been paying tax on the interest, which now amounts to about £20,000. I need a short-term loan of around £10,000 for home improvements. Would it be wrong to borrow from the interest on my sister’s money?

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silvercar

Speak to your sister.

Woodstok2000

Without asking your sister? Absolutely yes.

If your sister is OK with ti, then its fine.

tacpot12

Silvercar has the answer. Only your sister can give you permission. It's her money, but she clearly trusts you, so she may be willing to take a risk that she doesn't need £10,000 during the time it will take you to pay the money back into her account. Borrowing from a relative rarely makes sense unless the situation is somewhat unusual, but in this case, it might well make sense as you can afford to pay her at least as much interest as she would be missing out on yet still save yourself a bit of money.

If she does agree to this, you should formalise the loan, so that if anything happens to you while you still owe her money, her estate can recover the debt.

If these home improvements are a new kitchen, then you don't need to borrow £10,000. You can get a new kitchen much more cheaply, or you can save until you can afford the £10,000 yourself if that is how much you want to spend.

To be clear, it would be very wrong to 'borrow' the money without asking her and without her giving permission.

flaneurs_lobster

In effect, the sister has gifted her inheritance to her brother - on the understanding that it will be given back at some future date.

Unless there is some agreement (verbal or otherwise) as to what can be done with this money, the brother is free to do whatever he likes with the money, capital and/or interest.

marlot

I hope you've been deducting the appropriate income tax from your sister's account. It is an expense that you're incurring by her decisions.

If you've been paying the tax but not reclaiming it, then this decision becomes easy - you're owed about £20k.

I think it would be much wiser for the money to be in accounts owned by your sister. Perhaps ISAs. Or maybe it should be in a trust.

LightFlare

We rarely get any answers - but is this some cunning plan to prevent the sister reaching certain capital thresholds

I don’t get why she would be worried about “living off it”

If a sum is large enough to attract tax on the interest alone- I imagine most people would find something useful to spend it on or have the self discipline to invest

Ed264

Interesting that someone has assumed you're the brother. You could be your sister's sister!!

Anyway, my simple opinion is that you should talk it over with your sister, and as it's a short-term loan as you say, I'd guess that your sister would be happy to help you. Just make sure she's consulted and all should be good, I say.

Missy15

£20,000 in interest alone, means it was a sizable inheritance your sister received, what happened to your share?

The fact that your sister doesn't seem to have taken any of it at all, means she must have a fairly comfortable lifestyle without it.

However that doesn't mean you should " borrow " without asking her.

My advice would be to offer to help your sister save her own money in various accounts in her name, and deduct the tax you have paid on her money.

Then broach the subject of borrowing.

But if you have spent your own share on frivolity rather than practicality, don't be surprised if she says no.

CarManiac

Interest maybe (only if sure yiu can repay) -inheritance hard no unless she agrees,

I'd also recommend an ISA before rules change if paying tax

2702

Yes it would be very wrong. It appears that a large amount of money is involved. What happened to your share? and how will you pay your sister back? What formal agreement if any do you have with your sister for her inheritance to be placed in your name? What happens if you die tomorrow? as this savings account will form part of your estate. You say you have paid £20000 tax on the interest so you are declaring to the HMRC that this money is yours so you would need to gift the savings back to her.

You need to get the savings out of your name and place in your sisters name.You can then ask her to lend you the £10000 also the sooner the better before it gets even more complicated.