Lending money to family

[WendyisDarling]

I've already posted a few times, but this topic really has affected our family.

Let me provide a bad case scenario, which happened to us this past year.

We lent MIL money. She had been borrowing from her other son for quite a while. This seemed the right thing to do (and was except we didn't know how things work). When FIL died, instead of proving she had a life insurance policy that would pay off to the funeral home, we paid a lot of the expenses knowing the money would be returned when she received the life insurance money. She did in fact repay us as soon as she got the check.

BUT...trouble happened nearly a year later. MIL filed bankruptcy. Guess what? We had to return the money she paid us back to the estate! We were considered preferred creditors and "insiders" (just a term to mean family members). The court determined that she chose to pay us instead of others that she owed because we were family and that it wasn't fair to others she owed money (which I sort of understand from a legal standpoint). Not only did we have to return the money, we had to have a lawyer do all the paperwork to work out an agreement with the trustee to clear us of a judgment. (We could have filed a claim against the estate or attempted to negotiate, but the whole thing was a mess because she owed BIL so much money from other times she had borrowed and there was a lot going on we didn't know about).

So, lending that money not only turned into a "gift" , it also turned into legal fees, extra stress, time consumption, a big mess. We never would have thought that would happen.

Yes, this is an extreme situation. But, if you a family member that will pay you back and then they file bankruptcy within a year (vaies by state, I'd guess), you could be in for more than you ever bargained for.

BTW, I think the Wal-Mart gift card is an excellent idea and may help resolve some tension.

 

[bnorm27]

They say there are three things you should never talk about with your family: religion, politics, and money!

I like what some of the previous posters have stated. If you can afford to give them a gift, say $500 or so, then do it. You can tell them that you are unable to "lend" them the $2k, but to help out you would like to "give" them $500.

Lending money to family is kind of like investing. If you cannot afford to lose it, don't do it.

Good luck with your decision.

 

[Chicago526]

Isn't there a saying, that if you lend your BIL $1000, and he doesn't pay you back so you never speak to him again, did you really lose anything?

Another vote for "don't do it". That said, if you DO do it, then get a contract. I think there is a website that helps set up personal loans between family and friends, if needed one can even send a debtor family member to collections (though I'm sure that would ruin the relationship). I can't remember the website but I'm sure it would pop up on a Google search.

 

[Darsa]

All I can say is, if you DO decide to lend, PLEASEPLEASEPLEASE GET IT IN WRITING!!

I work with our state's Bar Association, matching callers with attorneys based on their legal issues; a large percentage of them are people who are trying to collect after making a "verbal agreement". I'm not a lawyer, so I can't give them any legal info, but I know that it's something that isn't likely to work out in their favor.

Good luck; I think that the gift card is a wonderful idea and a thoughtful gesture!

 

[ArielsMommy]

My SIL's DH got layed off from his job and they are having money problems. She called DH tonight and asked him if they could borrow a bouple thousand dollars to cover the house payment for January anad February. She said they could pay us back in the middle of February. He told her he would have to talk to me about it. I said no way. He is an independent contractor and his business is not secure right now at all. I am clinging to my money. He feels really bad that he can't help her. Am I being selfish? I am just afraid that if they can't pay us back and his business slows down, where are we?

Don't do it. I did and I have since vowed never again. It has only harbored bad feelings and resentment on my part and guilt on the family member's part. It has been almost 3 years and they still have not paid me back and it has ruined my credit in the meantime. IMO, don't do it.

 

[eliza61]

We do have the money. However, if DH has no business, we have no income. With this economy we may be living off our savings. SIL said they had no savings account.

How about a compromise? Say loan (give) her $1000. This way it won't hurt you so much if you don't get it back yet you still have helped.

 

[arminnie]

Here's the out that I always use - I have all of my money tied up in accounts where I cannot touch it without substantial penalty. I just tell them that I put it longer CDs so I can't even use it for myself. Works every time.

I have a distant con-artist cousin that I have not seen in decades. She calls every 5-10 years with some hard luck story. For every medical or job problem that she had I have "one better". She rarely even gets around to asking for money as I've so thrwarted her sob story by then.

 

[Praying Colonel]

I've never "loaned" money before--I'm not a bank, and I'm not equipped to collect or enforce a loan if they don't repay.

As for family, I have given money to family before when I had it. They called it a loan, but I considered it a gift because I knew I wouldn't try to collect or even bring it up in conversation if they didn't repay, and I had no expectation they'd repay. And there have been other times when I didn't have the $ to give anyone, and I said no.

 

[Newfie2000]

I know I am going to be in the minority here but I just had to add some thoughts.

First of all, personally in the same situation if I had the money available and had a good relationship with the family member I would definitely lend the money - at least the first time around. BUT... I would have to make sure that I was okay with the fact that I could very well not get the money back and would not let that damage our relationship in any way. As others have suggested I would not "gift" the money as to me that opens the door for future "gifts" and I would not want to start that habit.

But this is going to be one huge area where my opinions differ. I would definitely NOT put anything in writing. To me I would be doing a family member a favor, and if they valued the relationship as much as I did they would pay me back in time - however if they chose not to I would walk away knowing that I did a family member a good deed and that I knew I could very well not get the money back. I would most likely never lend them money again but I would not harbor bad feelings. But to put it in writing would be more like a business venture to me and it would make things awkward and tense. At that point no longer am I graciously trying to help a family member but I am enetering into a loan agreement. And that does not represent a family relationship to me. I know if my family member needed money badly enough to ask me for it then they do not need to be further humiliated by having to sign a contract, etc. If that is necessary then perhaps they should be visiting a bank and not me. To me it just strongly goes against the grain of family and what that represents. Sorry, just my opinion!

And some have degraded this family for not having any savings to depend on - but noone has bothered to ask many questions before passsing judgement. Times are tough folks, perhaps this family had savings and it has been used up already. None of us can ever honestly say we have enough left to survive comfortably no matter what circumstances should happen to come our way. I know many say that you should have a 3-5 months of mortgage and bill money readily saved - I am here to tell you that is not nearly enough!

Let me give you a flip side example to some of the stories you have already heard. Last year my DH was laid off in Oct. 07. This is pretty typical for us as he is a union construction worker and we are used to long winters off most years. For that reason I hoard money and save year round so that we are always comfortable during those times and live comfortably without relying on savings. However in Nov. a medical issue came up and he required surgery. He was medically out of work until March and just before being released another surgery became necessary. Normally March would find him working once again, but medically this was impossible. We were just about set to return to normal and his gallbladder decided to act up and the first week of July found him in the hospital again. Total last year he had four surgeries, all of them necessary immediately. And September he started a 6 month chemotherapy course which he is currently still undergoing. He is the solo bread winner in the family and I was willing to go to work and try to help make ends meet however we were back and forth to drs. hospitals and chemo and he was unable to drive - I needed to be home. I might also tell you I am only 36 years old and never expected my life to take a turn like this. By the time late October 08 rolled around things were getting pretty bad. A year prior we had already cut out most extras, and had changed our lifestyle drastically, no more eating out, bowling, movies, going out with family and friends. My SIL frequently asked us if we were okay and how things were going. When I replied we were okay she often commented on how amazed she was that I had enough put away to keep us going and that they would of lost their house in our position. That felt good to know that many others would of fallen long before I did but still as time went on - it was gettig harder and harder. One night while talking to her right after chemo started and the effects were taking place I burst into tears and just snapped. I told her I was not sure how much more I could handle and I was not just talking about finances - everything was getting to me. We were going to their house that weekend just to play some games and spend some time together and SIL came over to me and handed me a check. I was shocked and told her DH would never agree to this and that I could not take it. She assured me that if it made me more comfortable I could keep it between us and not tell DH. The next thing she did was took my hand and gave me a wad of bills and said and this is in case you guys need some cash right away. Please let us know when you need more. I cried that night for hours and eventually did tell DH what had happened. He called his brother and SIL and tried to return the money they refused. They said they needed to know that he could relax and recooperate and not worry about finances. DH reminded them that he was not sure what the future was going to hold and when he could resume work. They told him it did not matter. We emphatically told them as soon as we could we would begin paying them back. They were so graceful and understanding it was amazing. And DH returned to work about 1 1/2 months later. He works when he can and does not push himself further than possible since he is still in chemo. I have found lots of ways to earn extra and we did pay them back faster than we ever hoped for. But I have to tell you they were our angels - I don't think I ever would of asked but then knew us well enough to know what was happen, they saw the changes and they saw us struggle to hold things together for over a year and they reacted. We will never,. ever forget that! And our relationship has grown so much stronger for that. We were close before, unbelievably close but now we know exactly how much we would do for the other. And you know - I am not ashamed that the savings was not enough - I am not going to apologize for not being careful enough. It happens - circumstances far worse than you think are imaginable can and do come up. Family should be there during those rough times! But then again family can easily take advantage.

But I will say follow your heart and your instincts. Only you know what type of people they are. Only you know if they have really tried to make ends meet without asking your aid, only you know if theyhave any intention of ever paying you back. And only you know how this will effect your relationship either way. I believe instinct is an invaluable tool and all too often we cast it aside.

Anyways, I have rattled on long enough and I apologize to all of you for doing so. But it hurt to hear some of the judgements being tossed around. Believe I never, ever expected to be in the shoes I found myself in and it isnot a pleasant place to be. Please know we will keep you and your family members in ourt prayers and hope that this is the start of a new beginning for all of you.

 

[RadioFanatic]

When I was pregnant with our DS, IL's called to borrow several thousands of dollars that they were going to pay us back starting the next month. This was 8/07. We're now if 1/09 and have not seen a dime and not a word has been mentioned by then. I don't expect to see it and will never ask for it; but we will not loan anymore money to them as we have our DS to think of now.

My SIL's DH got layed off from his job and they are having money problems. She called DH tonight and asked him if they could borrow a bouple thousand dollars to cover the house payment for January anad February. She said they could pay us back in the middle of February. He told her he would have to talk to me about it. I said no way. He is an independent contractor and his business is not secure right now at all. I am clinging to my money. He feels really bad that he can't help her. Am I being selfish? I am just afraid that if they can't pay us back and his business slows down, where are we?

 

[EthansMom]

We don't lend money to friends or family members. If a family member had a true need through no fault of their own, then we would GIVE them an amount we could afford.

Let's say, one of our nieces or nephews needed some kind of expensive medical treatment that wasn't entirely covered by insurance. DH and I would be happy to contribute $500 to help cover the cost.

Let's say, BIL and SIL have been living high on the hog and putting nothing away for a rainy day. Suddenly, the economy takes a nosedive and BIL and SIL call looking for a handout. DH and I would advise them to find something to sell rather than give them money.

Lenders are currently being pretty understanding with homeowners who are in default. If the OP's BIL and SIL really will have the money to repay in a couple months, the lender would probably be happy to get it then. If not, there are worse things in life than losing your house to foreclosure.

 

[TheRustyScupper]

1) With all the comments, I guess we have been pretty lucky.
2) There have been several times we would lend money.
. . . friends in dire financial problems, we got them on their feet
. . . kids, where we paid for their house down payment
. . . friend, who needed cash due to a prolonged illness
3) In all cases, except one, we were paid back.
4) Sure, some took a year or two, but it came back.

5) I would say do what you comfortably feel like doing.
6) No one should criticize whether you lend or do not lend.
7) If you lend, you should see their plan for repayment (not like AIG loans).

NOTE: When lending to relatives, always have a clear plan for repayment. Chasing relatives for bucks can create enemies out of relations.

 

[fireflymedic]

you dont "loan" money to someone that does not have a job.

they will have no way of paying you back,

give thim some money or just keep your ear out for jobs for thim

 

[sbell111]

Never loan money to family (or anyone you like). It will only cause angst and ruin relationships. If they need it and you can afford it, give it to them. Otherwise, back away.

 

[KirstenB]

I know I am going to be in the minority here but I just had to add some thoughts.

First of all, personally in the same situation if I had the money available and had a good relationship with the family member I would definitely lend the money - at least the first time around. BUT... I would have to make sure that I was okay with the fact that I could very well not get the money back and would not let that damage our relationship in any way. As others have suggested I would not "gift" the money as to me that opens the door for future "gifts" and I would not want to start that habit.

But this is going to be one huge area where my opinions differ. I would definitely NOT put anything in writing. To me I would be doing a family member a favor, and if they valued the relationship as much as I did they would pay me back in time - however if they chose not to I would walk away knowing that I did a family member a good deed and that I knew I could very well not get the money back. I would most likely never lend them money again but I would not harbor bad feelings. But to put it in writing would be more like a business venture to me and it would make things awkward and tense. At that point no longer am I graciously trying to help a family member but I am enetering into a loan agreement. And that does not represent a family relationship to me. I know if my family member needed money badly enough to ask me for it then they do not need to be further humiliated by having to sign a contract, etc. If that is necessary then perhaps they should be visiting a bank and not me. To me it just strongly goes against the grain of family and what that represents. Sorry, just my opinion!

And some have degraded this family for not having any savings to depend on - but noone has bothered to ask many questions before passsing judgement. Times are tough folks, perhaps this family had savings and it has been used up already. None of us can ever honestly say we have enough left to survive comfortably no matter what circumstances should happen to come our way. I know many say that you should have a 3-5 months of mortgage and bill money readily saved - I am here to tell you that is not nearly enough!

Let me give you a flip side example to some of the stories you have already heard. Last year my DH was laid off in Oct. 07. This is pretty typical for us as he is a union construction worker and we are used to long winters off most years. For that reason I hoard money and save year round so that we are always comfortable during those times and live comfortably without relying on savings. However in Nov. a medical issue came up and he required surgery. He was medically out of work until March and just before being released another surgery became necessary. Normally March would find him working once again, but medically this was impossible. We were just about set to return to normal and his gallbladder decided to act up and the first week of July found him in the hospital again. Total last year he had four surgeries, all of them necessary immediately. And September he started a 6 month chemotherapy course which he is currently still undergoing. He is the solo bread winner in the family and I was willing to go to work and try to help make ends meet however we were back and forth to drs. hospitals and chemo and he was unable to drive - I needed to be home. I might also tell you I am only 36 years old and never expected my life to take a turn like this. By the time late October 08 rolled around things were getting pretty bad. A year prior we had already cut out most extras, and had changed our lifestyle drastically, no more eating out, bowling, movies, going out with family and friends. My SIL frequently asked us if we were okay and how things were going. When I replied we were okay she often commented on how amazed she was that I had enough put away to keep us going and that they would of lost their house in our position. That felt good to know that many others would of fallen long before I did but still as time went on - it was gettig harder and harder. One night while talking to her right after chemo started and the effects were taking place I burst into tears and just snapped. I told her I was not sure how much more I could handle and I was not just talking about finances - everything was getting to me. We were going to their house that weekend just to play some games and spend some time together and SIL came over to me and handed me a check. I was shocked and told her DH would never agree to this and that I could not take it. She assured me that if it made me more comfortable I could keep it between us and not tell DH. The next thing she did was took my hand and gave me a wad of bills and said and this is in case you guys need some cash right away. Please let us know when you need more. I cried that night for hours and eventually did tell DH what had happened. He called his brother and SIL and tried to return the money they refused. They said they needed to know that he could relax and recooperate and not worry about finances. DH reminded them that he was not sure what the future was going to hold and when he could resume work. They told him it did not matter. We emphatically told them as soon as we could we would begin paying them back. They were so graceful and understanding it was amazing. And DH returned to work about 1 1/2 months later. He works when he can and does not push himself further than possible since he is still in chemo. I have found lots of ways to earn extra and we did pay them back faster than we ever hoped for. But I have to tell you they were our angels - I don't think I ever would of asked but then knew us well enough to know what was happen, they saw the changes and they saw us struggle to hold things together for over a year and they reacted. We will never,. ever forget that! And our relationship has grown so much stronger for that. We were close before, unbelievably close but now we know exactly how much we would do for the other. And you know - I am not ashamed that the savings was not enough - I am not going to apologize for not being careful enough. It happens - circumstances far worse than you think are imaginable can and do come up. Family should be there during those rough times! But then again family can easily take advantage.

But I will say follow your heart and your instincts. Only you know what type of people they are. Only you know if they have really tried to make ends meet without asking your aid, only you know if theyhave any intention of ever paying you back. And only you know how this will effect your relationship either way. I believe instinct is an invaluable tool and all too often we cast it aside.

Anyways, I have rattled on long enough and I apologize to all of you for doing so. But it hurt to hear some of the judgements being tossed around. Believe I never, ever expected to be in the shoes I found myself in and it isnot a pleasant place to be. Please know we will keep you and your family members in ourt prayers and hope that this is the start of a new beginning for all of you.

I'm so glad you posted this. I have no personal experience with lending family members much over a couple hundred bucks, so I hesitated to offer my opinion. Your post shows that people can plan, and work their butts off, and sometimes it's still not enough. My eyes teared up reading about your SIL's kindness.

OP, most of us have relatives that can be a little sketchy. If this is the case, don't lend the money. But if it's just a bad time for your in laws, and they're good people, try to find a way to help out.

 

[fairykin]

My Only Sibling was laid off on new years eve along with the 8 people in his office. For the first time in his life he is without a job.
As soon as I found out.. I went through my budget and found 500 that I can afford to give each month til He gets a job.

My brother would help me in anyway he could. I will help him in anyway i can.

It's not a loan.. it's how could i not help out when i am able.

I feel grateful to be able to help... just imagine would bad it would feel to not be able to help someone that you love.

Gratitude allows me to help my brother.

Search your budget and your heart and find what you can give.

 

[Trish Bessette]

If she said she could pay you back in February why can't she make that month's mortgage payment

Sorry if this was already brought up - I didn't read all 4 pages.

 

[tlbwriter]

If she said she could pay you back in February why can't she make that month's mortgage payment

That's a good point. If she's going to have all of the money in February, she could simply pay her January and February mortgage payments when the money shows up. Yes, she'd be a month behind, but nothing would happen.

 

[TheBigBadWolf]

I have loaned money to my DB & DS several times, and they have loaned me money in the past, too. We have no parents to rely on in an emergency, and we help each other when we've needed to. We ALWAYS repay our loans.

On DH's side, I might be reluctant to loan money to some of his family. Most have no financial sense and never save for a rainy day. Fortunately, we have only had to loan money to one DS and she repaid us immediately, even though she is the worst with money. Another DS has cancer and is going through treatment out of state, so we will GIVE her money to help out with their expenses. They are having a rough time right now with both DS & BIL missing months of work due to the cancer treatment. We are glad to help them in any way we can.

DH has a son that we will never loan money to again. We have loaned him so much in the past, and paid his bills for him, and he has never repaid a dime to us. We finally told him upfront, "Don't ask again. We have given you all the money we are ever going to give you". We have tried to teach him to be responsible with money but it's a losing battle.

I say help your SIL if at all possible, even if it's only $1000. That's what family is for.

 

[punkin]

I have loaned money to my DB & DS several times, and they have loaned me money in the past, too. We have no parents to rely on in an emergency, and we help each other when we've needed to. We ALWAYS repay our loans.

When my sister was alive, we had money going both ways-to help each other with short term cash flow issues. We never had a problem.

***

I say help your SIL if at all possible, even if it's only $1000. That's what family is for.

Yes, that is what family is for. Unless, SIL has shown herself to be irresponsible in the past or has not repaid you or someone else, why not give her the money?