Hello forum, I’d like to ask your opinion please. We are 6 siblings.
2 siblings borrowed money from our elderly parents (sound mind). Our parents are very wealthy.
I have no problems with the fact that they borrowed money. No sibling is against it.
Facts:
Sibling 1 (S1) borrowed $40,000 (personal use). The agreement is that S1 should return it at some point.
Sibling 2 (S2) has a business. Our father decided to invest in the business ($250,000). This investment wasn’t done so my father hoped to make a profit. He just wanted to help out S2. The agreement is that S2 should return the $250,000 at some point.
Problem:
S2 says these two “borrowings” are completely different: S1 borrowed for personal use, S2 received an investment in his business (not for personal use).
I feel they’re exactly the same.
If anything, I feel S2 “borrowed” much more money.
Your opinion please? Are the two “borrowings” the same, or very different?
Sib #2 owes $250,000. $250,000 divided 6 ways is $41,666. So Sib #2 gets $41,666 less that his/her siblings."
Hmmm.
The way I would understand equitable payback is that, in re Sib 1, 40K is taken out of his/her share; that share is divided 5 ways and given to each sibling, increasing their share by 8K each.
Sib 2 has 250K taken out of his share; that 250K, divided by 5 results in each sib gaining an additional 50K over their share.
You all shouldn't be discussing this at all.
Money is money. It has no moral valence. Stop fussing about it, or just be happy that you have no need to borrow from anyone.
If dad tries to bring this up, tell him he needs to talk to the borrower, not you.
I'm not sure why you siblings were told about this at all. I recently acted as guarantor on a loan for one of my kids. It is not a matter for family discussion. I will not divulge this to my kids, not even to my kid who is my POA.
I have no problem with the fact that they borrowed.
My question is rather:
what other people think (for example on this forum) :
are the two borrowings the same or different?
S2 repeatedly says “S1 borrowing” (personal use) is morally bad. His (S2) borrowing is morally OK.
I'd pat his hand and murmur sympathetic noises in his direction.
Borrowing is borrowing.
Indeed, I feel the two borrowings are exactly the same.
You can call it an “investment”, but the reality is that S2 must return the money at some point, and our father doesn’t want any profit.
I feel S2 borrowed much more. (which is totally ok).
I feel it’s wrong of S2 to say:
S1 borrowing bad (because personal use)
S2 “investment”/borrowing, morally OK.
Is S2 paying interest on the loan?
What did your father receive in return for the money? - is he a shareholder, entitled to dividends, for example?
What is the formal agreement for the money to be paid back?
If none of the above applies, and there is nothing else in writing about it either, then it isn't a business loan. It's a personal loan, your father lending money to his child for the child to do with whatever he thinks best, and there is no difference at all.
And in that case, S2's criticisms of S1 are nothing more than self-justification, and if it really makes him feel better about himself then he is a thumping hypocrite. All the same, I should leave him to it - unless there is any particular need to comment?
S2 feels S1 (borrowed money for personal use, and that’s a morally bad reason).
Regarding S2:
it is not a loan.
It’s a formal investment.
Lawyer, documents.
But -
in reality it is like a loan. Their agreement is that he must return it (father doesn’t want any of the profit, if ever there’s a profit).
I would just say "hmmm" when S2 rants. Excuse yourself from the room or the house if needs be.
Look, I recently lent D1 30k as a short term float when she was buying a house. No signing, no interest, no discussion. Her siblings don't know about it, unless she told them. She paid me back.
My Son in law approached me about being a guarantor for a loan for $7500. last month. I said yes. Paperwork completed, they are behind on rent due to COVID-related job loss. No discussion with other siblings. He is starting a secure civil service job this week, so I don't expect a default. If they default, I still won't share.
This is the ONLY way to mix family and money--with complete privacy for all concerned.
My opinion only.
It sounds like you have one of those boundary-less families. Very bad for your mental health.
There is a lovely book called Boundries by Townsend and Cloud. Read it.
I see what you mean.
My father wanted to be transparent in the money he lent.
We don’t mind they borrowed.
Everyone can go through financial trouble.
We mind S2’s attitude.
When I "invest" in stock, I have no expectation of being returned my money.
When I buy bonds, I am lending a company money and expect it back with interest.
Investing is speculation.
Lending is a surety.
According to the signed document, from a legal perspective, this is an investment.
But —
in reality, their agreement is that S2 must return the money. My father doesn’t want any profit.
For this reason, we said S1 and S2 are the same. They’re both borrowing money.
(I repeat, we don’t mind.)
We mind this:
S2 saying that it’s totally different. S1 borrowing for personal use is morally bad.
Hence I wondered what others on the forum think about: personal use vs. business.
With that said, I grew up poor and my Dad died with nothing to inherit, and my Mom that I'm caring for will be the same. So my viewpoint will be different from those who expect or have received inheritances.
I think it's up to your parents to choose the amounts of money they wish to give each child. It's 100% their decision, and I don't think the idea of future inheritance should matter at all. If they are alive and competent, it's their choice and nobody's business about their financial affairs and choices.
The mistake was telling the children about the gifts, or the children telling each other about the gifts. When it's a private matter between the parent(s) and child.
Each gift of money is a personal decision they made and nobody owes anybody else any reasons or excuses because it is no one else's business but the parties involved.
In my opinion, the future inheritance should not be a part of the equation, as nobody is entitled to anything.
My Mom worked for a wealthy woman years ago, and when the woman passed away - she left everything to charity and nothing to her daughter. So, one never knows about the future - nothing is guaranteed.
It's very generous of your parents to help the children. I have never know any parents who have done this. They may have believed in the business, thus giving much more to help support it. They are trying to be generous and helpful - not cause division or strife.
But I understand your opinion.
I’m grateful in any case. I learned a lot from the answers.
As Barb said, a loan is made with the expectation of being paid back; there are usually terms and conditions under which the money is lent: time frame to pay back, interest, etc.
An investment (unless a guaranteed investment) is a risk vs. reward scenario: "I'll invest in this house flip with you and put up half the money, and we'll split half the profits" with the understanding that, should the investment lose money, the investor will not be able to recoup their original investment amount.
If sib 2 approached dad for a loan to start a business, that's one thing; if sib 2 approached dad to invest in his business, legally, that is a very different issue.
You say dad wasn't expecting to make a profit, but has he? Does he have some sort of say in this business, or is he receiving any sort of monthly income from it? If this ends up in court, those terms are going to be key in deciding if this is a loan or an investment.
If parents are wealthy and being short this money isn't causing any sort of financial hardship, there is a simple way for dad to deal with this, and that would be to set up in his estate terms that would reconcile any owed moneys in you and your siblings' inheritances.
Sib #1 owes the estate $40,000. $40,000 divided 6 ways is $6,666. So Sib #1 gets $6,666 less that his/her other 5 siblings.
Sib #2 owes $250,000. $250,000 divided 6 ways is $41,666. So Sib #2 gets $41,666 less that his/her siblings.
My kids borrowed money from my mom for college. When she died, I added up what my kids owed, divided it by 3 (me & 2 sisters) and added that amount to each of my sister's shares of the estate. Both of my sisters told me not to worry about it, but I felt that my kids borrowed that money under the conditions they would pay it back to my mom, and since she passed before they could make restitution, I paid the estate from my share. Then I "forgave" my children the loans to me. It was fair for everyone, and this way I was assured that this (relatively) small amount of money wouldn't be a bone of contention in the future.
It's lost forever. "Borrowing" money means it's gone for good & likely to never be seen again. Your father gave that money away for free, knowing in his heart it would never be repaid by either child.
I 'loaned' my half sister $3500 about 20 years ago, to help her out of an eviction situation. I've never seen that money again, and she's never even offered to pay me back, even in installments. I've never asked her to, either. Had I expected that loan to be repaid, I'd have asked her to sign papers to that effect, which I did not.
A 'loan' is given by a bank and repaid with interest. It's a contractual obligation.
When a family member 'loans' another family member money, they're giving it away for free with none of the obligations expected from a bank. Unless they ask for papers to be signed saying that loan will be repaid by thus-and-such a date.
This question is not one for a caregiving forum, as Becky said, and not likely to be resolved here with 'opinions', but between your family members in private.
I’m grateful for the answers, because it did help me.