Dear Moneyist,
My father lent my brother $100,000 to help remodel his home. There was a promissory note for $53,000 signed. The rest of the money owed was acknowledged via email between my brother and father. When my father died, my two brothers inherited his property and an income generating business, while his three daughters received cash/liquid assets.
The problem now is trying to get the $100,000 from my brother that he owes the estate.
At this time, he can’t get a home loan or line of credit on his remodeled home as it is not finished and probably won’t be for several months. The deed to my father’s property has not been transferred and has remained in the estate name for seven months. My older sister is the executor. She is hoping that, someday, a loan from his remodel will come through and we will get paid the last of our inheritance.
Also see: How can I ensure my husband and his lazy kids honor my will?
Oh by the way, my brother has not paid a penny of interest on this money. What are our options? Can we take a loan out on the estate to pay ourselves and then just transfer the property to my brother, forcing him to take the loan? Also, his share of the income generating business left to him is $2,000 per month and his son is living in my dad’s house rent-free.
I could use some advice. I do not want to cause family discord but want some resolution.
One of the three daughters
Dear Daughter,
The obligation to repay this debt does not go away after your father died. Your brother owes $100,000 to your father’s estate. That much is clear, and there is evidence to prove it. A promissory note is ideal when lending money. Email is less than ideal, but it has been shown to be valid in upholding the terms of a contract. In the absence of any interest rate on the loan, any estate lawyer would look for proof that your father lent his son an additional $47,000.
In this 2013 case in New York, Gelco vs. Forcelli, an email was sent between two parties agreeing to settle damages as the result of a road accident for $230,000. However, the case was subsequently dismissed by the Supreme Court, but the New York Appellate Division upheld the payment of the $230,000 to the third party, as it satisfied the criteria of a “a binding and enforceable stipulation of settlement.”
Also see: I am about to inherit $1.75 million—should I buy a house in cash and pay off my wife’s student loans?
“Consumers and businesses are often quite surprised, and, in some cases alarmed, to learn that seemingly casual conversations, which contain relevant language, can be sufficient enough to create a legally binding contract or even a guarantee,” according to DBL Law, a law firm with offices in Kentucky and Ohio. “If a person put their name on an email to indicate that it comes with his/her authority and takes responsibility for its contents, it will be deemed to be a signature for the purpose of an agreement.”
This will impact all of your inheritance. The executor and lawyer for the estate should be notified of the outstanding debt and it should be deducted from your brother’s inheritance. Or you could agree for your brother to repay the debt in installments. Either way, it seems unrealistic and unfair to your other siblings that your brother would receive $2,000 per month income when he owes his father’s estate $100,000. You either decide as a family to write off the debt. Or not.
You should, ultimately, agree to resolve this as a family.
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