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My mother died 2 years ago and left a house to me and my two younger brothers.

She wasn't very good with money and got herself in financial difficulty about 10 years ago and had to be helped with a loan from my uncle to stop her house from being repossessed.

There was a contract between them so legally there is no dispute, the contract was for 3% simple interest per year on the loan amount. Also my mother offered to repay the money owed 18 months before her death, the offer was refused due to my uncles legal/business problems at the time.

The problem is this, My uncle says that he took out a mortgage of his own to lend the money to my mother (this only came to light after my mother died and the mortgage documents he has to prove this are dated one month after the contract he had with my mother).

He wants to be repaid the loan amount, all of the repayments he has made towards the mortgage he took out and 3% interest on the repayments he has made. In addition to this he has difficulty showing the specific repayment amounts because at some point he rolled the mortgage up into another mortgage for a larger amount.

My uncle won't be happy if he doesn't get what he has asked for and might cause difficulty for me and my brothers in our extended family. Me and my two brothers each hold different opinions on this issue and we cannot find a way to reconcile them. My eldest brother only wants to pay what is in the contract, I want to pay an amount that wouldn't see my uncle out of pocket for helping my mother and my youngest brother wants to pay him whatever he has asked for.

I do not know how to move forward with this.

I have already sought legal council and legally any challenge to the contract is extremely unlikely to succeed, this question is only about the family conflict and how to deal with it.

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    Sounds more like a legal issue(which will be more of a documentation/what can you prove in a court of law sort of thing) than an interpersonal one(when family is involved, this gets very difficult very quickly). I'm going to go with "I think you might want to explore legal counsel." – user2014 Aug 29 '17 at 15:44
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    in that case, fantastic! follow the terms of the contract. done! – user2014 Aug 29 '17 at 15:49
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    @PlayDeezGames, that doesn't really help with the interpersonal aspect of the issue. – user1450877 Aug 29 '17 at 15:50
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    my family is "messed up" also. i empathize, and would offer helpful suggestions if I could think of any, but I can't. if your uncle decides to be difficult, then he decides to be difficult, and there is very little you can do to stop that. – user2014 Aug 29 '17 at 15:51
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    "My eldest brother only wants to pay what is in the contract, I want to pay an amount that wouldn't see my uncle out of pocket for helping my mother and my youngest brother wants to pay him whatever he has asked for." You could do exactly this. There doesn't have to be agreement between brothers all the time. You all must honor the contracts but beyond that it's all up to your personal considerations. In my family we kind of avoid financial transactions between family members, it usually doesn't end well whatever you do. – Trilarion Aug 30 '17 at 10:35
34

Money burns bridges

  1. Ask your uncle the amount he wants.
    You stated this on your question, so you should've known by now..

  2. Pay back your uncle whatever the amount your mother owed him, according to the contract.

  3. After that1, calculate the difference between the amount he wants and the amount already repaid.

  4. Talk with your brothers how much amount (all of) you can and willing to spare for your uncle.

  5. Explain to your uncle that the contract has been honored, and this is an appreciation for what he has done.
    Don't mention any of his mortgage. If he brings it up, thank him for going so far to help your mother, and politely remind him that his mortgage is not in contract and is his responsibility. Avoid further arguments.

  6. Give2 the money to him.

1You must finish the contract first before going to the next step. This is to ensure that your responsibility is done, and your uncle can't bring it up in argument.
One scenario is your uncle might refuse the payment. Simply transfer the amount to his bank account, and it is a proof that you have paid him. Whatever he will do to that money afterward does not disprove that you have made a payment, including transferring back the money.

2Not pay. You don't owe him anything after you honor your contract.


You are not responsible to your uncle bad choices. This is basically a step-by-step to solve this and avoid complication on your morality. Stop feeling guilty.

After this drama, you can offer help to your uncle to get through his debt. Personally, I prefer gifts (as money), as you will be prepared not to see your money back, but you can also offer loan, with contract.

Remember that "money burns bridges". Everything will never be the same. Whatever your other relatives might think of you, don't feel guilty. You've completed the contract, and you already offering help to your uncle.

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    Very good point about contract versus gift (which is what he's asking for). It's also important to know where and when this took place. 3% interest may already be more than enough to show your appreciation, or it may be way below inflation. So the term "bad choices" may be used inappropriately if the 3% was actually a good deal for him. – Peter Aug 30 '17 at 23:52
  • The problem with this approach is that once the amount of step 2 had been repaid you lose any negotiation power on the remaining amounts. It is far better to arrive an a mutually satisfactory arrangement before paying anything. – Itsme2003 May 28 '18 at 13:55
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    You don't need negotiation power. All you need is to say "No". – gnasher729 Jun 27 '18 at 23:23
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Honor the contract your mother made with him. If she had paid it back (it was not paid back in full at your uncle's request), this would not be an issue.

Asking you to take on a burden he made a decision to take does not obligate you to take it on as well. His claims are murky at best and suspicious at worst.

...all of the repayments he has made towards the mortgage he took out and 3% interest on the repayments he has made.

He's basically asking you to pay for his bad business decisions (if he could not afford to lend your mother money without endangering himself, he shouldn't have done so.) Repaying his mortgage payments in addition to the loan is basically giving him a big chunk of money for free.

If you're afraid there's a real chance he can make life miserable for you, offer him a token, say, increase the interest on your mother's loan to the percent he is paying on his own mortgage loan(s). So if he's paying 5%, give him the amount she owed plus 5% interest (compound or whatever the contract stipulates.)

If you have real feelings/care about this uncle, you can be more generous and, say, double his interest on your mother's loan. Or, conversely, you can offer him a loan at your mother's rate of interest to cover the (murky) difference between his loan repayments (only up to your mother's death), but know that you will not get this money back.

If you're afraid of what other relatives say, it depends on how important their opinion of you is. Money makes for tricky situations.

Edited to reflect comments.

  • his argument is that if he hadn't had to make the repayments on the mortgage he could have invested that money and made at least 3% return on it. – user1450877 Aug 29 '17 at 15:52
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    @user1450877 - He made the choice, not you, and not your mom. But if that's the argument he's making, repay the loan at a higher interest rate. In the past decade's economy, he couldn't have made a killing; doubling the interest rate sounds fair to me. – anongoodnurse Aug 29 '17 at 16:10
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    "He could have invested that money...." to be polite, nonsense! He could also have invested and lost the money. Or decided to spend it. Pay no attention to the "I could have...." arguments. – user1760 Aug 30 '17 at 20:42
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Quite frankly, your uncle's actions don't speak to good faith on his part.

If I'm understanding correctly, your mother offered to pay the loan in full, and your uncle refused. Yet now that your mother is gone, he suddenly is claiming that he has additional out-of-pocket expenses because he over-extended himself on the loan he made to your mother.

The first question that springs to mind is: did he discuss this mortgage, and his payments on it, with your mother?

If he did, ask him what she said. If he didn't... then you need to ask yourself why he would keep that a secret from your mother, but suddenly become very open about it, and ask for extra compensation for it, with you and your brothers.

I'd be very hesitant to give him anything beyond what the contract states. It really sounds like he has decided that he deserves more than was left to him, and sees you and your brothers taking over her estate as an opportunity to get it.

4

This is really a messy money dealing. I can't imagine why anyone would be willing to take out a loan in order to loan money to another. That is a significant risk. That said, what he is asking for is an alteration of the original agreement. It would help to understand what the payment terms were per the original agreement, as the contract could already be nullified if your mom failed to meet the terms. If that were the case, that originally she agreed to something that didn't take place (like starting repayment within a year of the loan date) then I would feel more ethically inclined to consider some alteration to what he is owed.

I say that for this reason. If say it was $10,000.00 to have payment to start in one year (to give her grace time to catch up), then he may have thought he would be able to pay down the loan much faster. He could put his own money toward repayment as well as anything she was sending as payment. If that was what was supposed to happen, it would put him paying additional interest that would have otherwise been much reduced by a faster payoff.

Of course you also have to account for what you can afford to do. I don't understand if this home is needed for someone (or all of you) to live in, if you intend to sell it as an asset, etc. It also should be taken into significant account that there would be no house to share or sell had it not been for his stepping in to save her from losing it. That is a huge thing for anyone to do for another and not at all to be seen as merely a money issue. He clearly didn't just have the money to give if he then borrowed money to cover that. He placed himself in financial risk to do this.

So I would say do whatever you can to work this out amicably with him. He has to be a relatively decent person to have done this for your mother. If that is the case, he is also someone you would want to have good relations with in your life as he has shown himself to be willing to step up for family.

It is also difficult to know how reasonable any of his requests are when there are no dollar amounts given, no timeline by which it's stated for you to do the repayment nor an indication if the house is to be sold (thus having the equity to settle this debt). And he very well might have changed some of what he wanted as his financial standing has changed. That may seem not "fair" but you also have to weigh that against his helping your mother out in such a desperate time when her financial standing also had taken a bad turn.

  • The loan amount was for £40,000, the contract stipulated that interest would be 3% simple interest per year, there were no terms of repayment beyond that he would get his money back when/if the house was sold. The difference between what he is legally entitled to and what he thinks he is owed is about £10,000. – user1450877 Aug 29 '17 at 20:09
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    That does help put it into perspective as that changes the sum tremendously, and he was always aware he wasn't going to be paid until the home sold. He is now asking for 25% more than agreed. At my rough math he would be owed about £12,000 in interest on 10 years at 3%, £22,000 is considerably different, that is near double. I also don't totally agree on "I could have invested". My husband and I invested in "safe" things and we have actually lost in the last decade overall versus gained. There is nothing you can say will definitely gain, and hindsight is 20/20. – threetimes Aug 29 '17 at 20:18
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It is not your fault

It is not your fault. No matter what, don't let people blame you for the deeds of your mother. If someone lent her money he should accept the responsibility for his own actions. She is not here anymore to validate any claim on her stake and you should not take the word of your uncle for sure because he has a vested interest.

Accept failure

A family conflict about inheritance is an open wound. There is no way it is going to end up well for everybody. Don't even try, there is nothing you can do that will please everybody. The best thing you can do is minimize the emotional toll. You have a few options for that:

1. Try arbitration or mediation

Get someone you both trust and respect, and let him have the hard talks. Just say: "uncle, I want to honor any debt but this is a hard subject for me and I'm unable to deal with it personally - just talk to X, whatever you agree is good for me". Or the non-binding version suggested by Vylix: "Let's ask X or Y. They are wise. Let's hear what's their opinion on this".

If one of your relatives criticize you for doing that, he is trying to manipulate you. Don't argue about it. Just say something like "How am I supposed to deal with this personally right now?".

2. Get a lawyer

If a mediator is not an option, try to get a lawyer involved. You probably can get one agreeing to receive a percentage of your stake. The rationale is the same, "uncle and brothers, I'm unable to deal with this matter personally because there are a lot of emotion involved so I named X to represent my interests, deal with him". Refuse to talk about it with your relatives: "I understand you are upset by me involving a third party but you are always going to be upset when you mix money and family. If you don't want to be upset just do the same and let someone else do the hard talks for you".

Someone may say you are a jerk, but the justice system is how civilized persons deal with conflict.

  • " just talk to X, whatever you agree is good for me." Are you implying to let him ask X alone, and accept whatever X say? Are you trying to say instead, "Let us talk to X to get his opinion."? I would write a little bit differently than that: "Let's ask X or Y. They are wise. Let's hear what's their opinion on this." – Vylix Aug 30 '17 at 15:31
  • Reminder to OP: If the mediator is a respected family member for both party (and general relatives), you are indirectly put both yourself on an arbitration. If either one of you decided not to follow the advice of the mediator, be prepared to be shunned by your relatives - of course, the word of that will likely gets out from the "winning" party. – Vylix Aug 31 '17 at 3:46

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