<p>Goodness! This certainly hits close to home! I need to start another thread so I don’t go off topic here!</p>
<p>I lent my brother money which he paid back with interest- he never missed a payment. If my BIL asked I suspect my wife would feel we should also make a loan to him and I would be concerned but as long as it was not my D’s college money or our retirement we would make the loan (gift)- since there would be zero chance he would pay it back.
We loaned my D’s friend $8,000 when he got into financial trouble- taught him some fairly simple lessons on finances and so far has not missed a payment. He was also charged interest- lower than the bank charges.
My sense tells me when we make loans to friends and relatives we know who will pay us back and who will not.</p>
<p>Your brother-in-law needs to wake up and get a reality check. Not to be blunt, but he has no business living in a $1 million plus property if he can’t pay the bills. </p>
<p>He should sell this property immediately and move into something he can afford. Sure, it might be a downgrade in his ‘lifestyle’ but living in a modest home he can afford ultimately leads to a far better lifestyle than living in something over the top that he can’t afford. Sure, now might not be the best time to sell if you want top dollar but given the situation he’s in, he really doesn’t have a choice. </p>
<p>If he’s asking you for the money then it almost surely means the bank has turned him down. It’s not your responsibility to take the risk that he’ll turn things around and be able to pay you back… and especially when he’s sitting on a valuable property. He needs to take this risk himself, which means selling the property, living in something smaller, and using the profit and monthly savings achieved to get himself back on track. </p>
<p>The only way you should even remotely consider giving him the money is if you were going to give him the $40k as a gift… which it sounds like your not willing to do. Therefore, I’d have to say absolutely do not give him the money.</p>
<p>Counseling with H about this issue sounds like a great idea, actually. Then both can air out feelings in a safe setting and can get on the same page about what to do about this request for a loan, and then can provide a united front.</p>
<p>I think that it is unfair to put OP in the position of being the meany. Perhaps it is easier to get along with your brother if you can claim that you would have lent the $$ except for meany wife. Frankly, I would be glad to take on the role in this situation.</p>
<p>But a better way of dealing with this would be for H&W to put up a united front…and telling BIL that a “loan” will not be forcoming.</p>
<p>jmmom - I’d read more than halfway through this thread before I got to yours, and you took the words right out of my mouth. I suspect the OP knows what the right answer is, she is looking for affirmation from CC that she has a case against her husband. I can’t imagine anything she’d say at this point that would make anyone comfortable with the loan being made. While the BIL has created the situation, the issue is now really between the OP and her husband, no matter which decision they make. The OP sounds as if she is more fearful of the consequences from her husband for making any decision, more than what will happen if the money isn’t repaid if they make the loan. I’m sure the OP and her husband have been faced with expensive decisions before, where they both agreed and both took ownership of the results. However, the issue here is more or less, a power play with some passive aggressive stuff impending. If it weren’t an issue of who has more power, or who wants more control, then the two of them would be able to sit down and hammer out an acceptable compromise.</p>
<p>As an aside, regarding the inheritance… my husband and his two brothers will be the recipients of two trusts when their grandfather’s second wife dies (by God, I think she’s in her mid-90s now, and the grandfather has been dead for 20 years). We get statements every year from the executor of the trusts, and we noticed that one of H’s brothers draws a certain amount of money each month from the trust. We assume (although we’ve been meaning to follow up with an estate attorney) that whatever he has ‘borrowed’ from the trust up until her death, will be subtracted from the amount due him. So there is some mechanism possible for people to borrow from future inheritances.</p>
<p>It was my thought early on that they could go to the executor of the will and request the BIL’s first $40K go to them. It’s doable in most cases. But recently I watched a friend who assumed a large inheritence get a fraction of it do to the timing of here dad’s death and the state of the stock market and real estate. Unless they are fully aware of tax issues it could be dangerous.</p>
<p>If you have to borrow money to loan money, then you are in no position to loan money. I’d suggest to H that you liquidate the kids’ college fund to help BIL. After all, you could use the HELOC later to pay for college. Maybe that would put things in perspective for him. Then he can be the meany.</p>
<p>^^^ What she said!!!</p>
<p>Don’t do it.</p>
<p>Counseling / financial planning accountant might help get some disclosure.</p>
<p>Also we do not need to know, but I believe your H and you need to know if nephew is estranged from his father due to money.</p>
<p>For other people who might actually be in more of a position to loan money that they might get back… </p>
<p>[Borrow</a> and Lend Money From Friends and Family With Virgin Money](<a href=“http://www.virginmoneyus.com/Home/tabid/36/Default.aspx]Borrow”>http://www.virginmoneyus.com/Home/tabid/36/Default.aspx)</p>
<p>Makes it a LOT more formal and gives you a bit more leverage, also makes it easier to claim bad debt with the IRS, who prefers to consider family loans “gifts”</p>
<p>Well, I’ll be darned…I’ve never seen anything like Virgin Money–I like the personal loan packages–“the Handshake” and “the Handshake Plus.”</p>
<p>What isn’t Richard Branson into?</p>
<p>I am the OP, back with an update. First, I’d like to say how tremendously grateful I am to everyone who has posted words of advice and support. Your perspectives have been so helpful to me in clarifying my ideas, and there have been several practical suggestions that we are going to use.</p>
<p>In thinking about this situation, I’ve realized that DH and I are not as far apart as it originally seemed. When he first told me of the situation, he was assuming that we would lend the money, but one of his first questions to me was whether we should “put a lawyer between us” - that is, have a legal agreement between us as lenders and the brother as borrower. Thinking back, this indicates that (1) he did not want to make a gift and (2) he knew there was a good chance that his brother would not pay us back and he wanted to increase the chances that he would. I also realized that it is not in my husband’s personality to turn down a brother in desperate need, especially in this situation where a loan now would forestall a cascade of disaster. It also occurs to me that if the cascade is allowed to occur, the brother’s family may very well soon be in desperate need of much more support than we are talking about now.</p>
<p>Information is still coming in, but this is what I hope I have accomplished, with help from all of you. First, the loan amount may be lower, as I think I have persuaded DH that the renovation/rental idea does not make sense. This would mean that we would lend only enough to satisfy the pressing obligation. I do not want to specify what this is, but there is a moment of reckoning coming very soon. </p>
<p>Esobay, thank you so much for the pointer to Virgin Money. This is exactly what we need. Their costs are very reasonable - much less than any lawyer would charge - and everything is right there, so I would not have to spend time researching options. I also came across a reference to a non-profit credit-counselling service (InCharge), that may be able to help my BIL find a long-term solution to his mess. I am not all that hopeful that he will change his ways, but this is a practical way to direct him to help. We will also let him know about the peer-to-peer lending possibilities - this might be a way for him to clear out his credit card debt and replace it with debt at lower interest rates. Vballmom, thank you so much for letting me know about this - I had never heard of it before.</p>
<p>The situation is not yet resolved, but I think that what will happen is that we will lend the smallest possible amount, and set up a loan agreement through Virgin Money. We will direct him to the credit counselling service and the peer lending networks, and hope that he will be able to improve his situation with their help. </p>
<p>You have all reinforced my initial reaction that lending money to family members is a bad idea, even more so if we need to tap the HELOC, that may not be there. I have talked to my sister, our financial adviser, and she knows several people that this has happened to, and it even happened to her. She had a $50k HELOC on her home. At tax time last year, she was waiting for a big check from a client and wanted to make a payment into her retirement fund before the deadline. So she withdrew $10k from the HELOC, and within 2 days had a “nastygram” from the bank, reducing her line of credit to the $10k already borrowed. She is, believe me, the most financially conservative person around and a very good risk. So the fact that our HELOC is sitting there, looking like it is ready to be tapped, means nothing. But if it is the lower amount, we will be able to lend it without using the HELOC - it’s just that our ready cash reserves that are not allocated to home repair/renovation expenses are going to be uncomfortably low. We could, I suppose, slow down the work on the house, but I hate to do this. These are not really optional expenses. If we were to sell our house, we would have to do this work before we could put it on the market. </p>
<p>Some years ago, we realized that we had enough savings to completely pay off our mortgage. At the time, it seemed like a good idea to do this and open a HELOC to serve as an emergency fund. We’ve kept this up and, while we do have some liquid savings, we would keep more money in this form if we didn’t have the HELOC. I’m realizing now that, while this might have been a good idea then, it is not a good idea now. So we will be building up our liquid savings as fast as possible.</p>
<p>Worried- maybe require the credit counseling BEFORE you consider loaning- so that he must sit down and spell it all out- can your loan solve anything or will he hit the skids again? Even with Virgin money, I would still collateralize the loan against the house, - car, whatever you would take should he go BK down the road - protect yourself in case he cannot protect you.</p>
<p>Good point, somemom. Once he gets his $$, he’ll blow off the counseling. The trouble with collateralizing a loan is that you have to be willing to execute on the collateral. Not sure OP would be willing to go this far.</p>
<p>My husband’s godson and cousin was in dire financial straits a few years ago due to the double whammy of job loss and his wife leaving him with 3 kids. This is a family who was barely making it with 2 income, now down to one. We stepped in before they foreclosed on his house and put down some money to stabilize the situation. I took the kids for the summer, and then came up with a plan where his siblings and parents are pitching in about $200 per month of support for him, as is the flown the coop wife. We have eased out of the picture after putting in a substantial amount of money to get things on this roll. Part of the money we invested was in putting in a wall that splits his house in two, and he can rent out the familyroom and kitchen. A half bath was made into a full one and a kitchen strip added to the dining room. We have an agreement that we will get a portion of the proceeds when and if the house is sold. I am not counting on that money.<br>
There is resentment that we did not do more since we can. No real thanks from all of this. How quickly they forget. When it is family, you should pretty much understand if the money is gone, it is gone and not worth ripping family bonds in a fight. However, you should put in conditions, so if they are not met, it makes it difficult for them to come for more. Draw up a contract so that you have a lien against the house at sale, if you lend him money, and ask for a portion of the rent he will get when he rents out that will reduce the lien. Document every bit. Then do not allude to it in regular conversation. Make it clear that your money is earmarked and you need for a number of things. Not that it will get rid of the resentment, but at least you have let him know that you have your needs and plans and are not sitting on funds for the sake of it.</p>
<p>On collateralizing, I am thinking of the possibility of him going BK or any other form of broke where the house of cards falls in- if he has a car or something else paid for, that they can attach, then they could let the other creditors fight it out and they take their item.</p>
<p>Sometimes desperate times lead to more and worse desperate times, sometimes even through no fault of the BIL. </p>
<p>20 years ago we had several family members involved in real estate investments together, the market took a hit and every one would have been fine if we’d held it, but one family member sued to have the property sold and every one lost big 
No one ever thought a family member would sue, but many people lost money because the paperwork was a bit loose and they could not protect their interests in court adequately. If one of BIL’s creditors or his employer go ballistic, you would be a victim, too</p>
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<p>Wow, cptofthehouse–that must be aggravating!</p>
<p>IN my experience, too, it turns out as cpt said, no matter what you do to help, you are the bad guy when you either stop doing or ask for a repayment- do not loan to family or friends unless you can afford to gift it, unless you are darned sure you will get it back, etc. Do not do it to keep peace, if you are going to have some one mad at you, do it before they take your money with them!!</p>
<p>Aggravating, yes, but typical, from what I understand. Even on CC where the adults are about as reasonable as they come, there is a undercurrent of resentment for those who are well to do or “have more”. Sometimes it is a tidal wave. I think those who have good incomes and savings, understand that they are in better shape than those who do not, but much of the financial security is because of the way they do not spend money. </p>
<p>I do not expect to get back the money that I have given to family members, even from those where we put in writing that the money will be returned upon sale of a house. Last time we did that, there was not a dime left when the house was sold. We understand that and will not bring up repayment unless more money is asked. The only reason the other closer family members are now pitching in is because we did put in a substantial amount to take them out of the hole. I expect this support to end in a year or so. Hopefully we get a year out of it. We are collecting the rent from the renter and keeping it in an account for the cousin, and doing their taxes and monitoring the finances. Yes, there is deep resentment, but it was that or lose the house. I would have let it happen but there are three kids who have essentially lost their mother, have a broken family and are shell shocked enough. The security of that house has made a big, big difference to them.</p>
<p>“but much of the financial security is because of the way they do not spend money.”</p>
<p>That’s a very big part of the key. One common denominator in building wealth is the ability to delay self-gratification. That is hard to do with peer pressure and the media all around us. It’s hard on kids in school that see others with nicer stuff and it creates demands on busy parents where it’s easier to give in than to explain personal finance.</p>
<p>I have two siblings that are frugal (perhaps it happens when you grow up with very little in an age where thrift was still a virtue) and one sister that isn’t but her husband has a trust fund. Neither are working right now and they have two kids in private schools. From what I can tell, I don’t expect anyone to ask anyone else for help as every family has demonstrated pretty sound financial management for two decades. I also believe that each family would help out the others if a crisis arose.</p>
<p>I know folks who are taking up a collection from family to keep kids in private schools. I have my kids in private schools and, yes, it would pain me and them to have to take them out for financial reasons, but that’s the way it works. It galls me to see someone asking family members whose kids are going to public school for help to keep the kids in private, but they do not see it that way.</p>
<p>I haven’t read the whole string and not sure of some details … but … there is a reference to an impending inheritance and I believe mention of the parents no longer being alive. So it sounds like their estate is in escrow. Could your BIL (and your H) go to the executor of the estate and ask that a loan be taken out against your BIL’s expected inheritance? (or if these details are not right … a loan with whoever controls the expected inheritance)</p>