QUESTION
Is a handshake loan from a parent to a child binding to estate if parent dies before loan is paid back?
Asked on Jul 19th, 2013 on Estate Planning - Michigan
10 ANSWERS
Probate Attorney serving New Orleans, LA
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James G. Maguire
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If child claims the transaction was a gift rather than a loan, the estate representative will have a difficult time proving it was a loan.
Answered on Jul 26th, 2013 at 2:36 AM
It would be difficult to enforce the loan unless there was some paperwork as evidence of the loan ie a check with "loan" on the memo line.
Answered on Jul 26th, 2013 at 2:36 AM
2 Awards
It depends. If payments were made or there is other evidence of the loan, it can probably be enforced.
Answered on Jul 26th, 2013 at 2:36 AM
Probate Attorney serving Newport, OR
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Minor, Bandonis & Haggerty P.C.
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The problem is not whether the estate is bound, the problem is whether the child is bound. The estate has the same problem parent would have had collecting this loan, but with an additional twist. The problem is proving it's a loan, and not a gift. The best evidence of parent's intent is parent's testimony, which is now unavailable. If child was making repayments that gives you some evidence. You may also have some indication that this was an "advance" on the child's share of the estate. It's all about what objective evidence you can find and remember, "Dad said" doesn't work, that's hearsay.
Answered on Jul 26th, 2013 at 2:36 AM
Probate Attorney serving St. Louis, MO
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Edward L. Armstrong, P.C.
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Oral contracts are valid but often the issue is proof that there was an agreement. This can be difficult especially if one of the parties is dead.
Answered on Jul 26th, 2013 at 2:36 AM
The difficulty with not documenting these types of loans is how they are proven after the death of the parent. Notwithstanding this difficulty, the loan is valid and can be enforced by the estate against the child. Due to the numerous pitfalls and problems of doing so, consult with an attorney specializing in estates.
Answered on Jul 26th, 2013 at 2:36 AM
An agreement, except as to certain transactions that do not apply here, can equally be orally or in writing and have the same binding effect. The debt becomes part of the parents' estate.
Answered on Jul 26th, 2013 at 2:36 AM
Bankruptcy Attorney serving Florissant, MO
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Law Offices of Thomas Corcoran Phipps
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The executor of the estate may sue the child, and will have to prove that it is a valid loan.
Answered on Jul 26th, 2013 at 2:36 AM
Business Planning Attorney serving Livonia, MI
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Frederick & Frederick Attorneys at Law
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No. You need written evidence. The handshake loan would die with the shaker. It is likely that the statute of frauds would also prevent enforcement of the loan.
Answered on Jul 26th, 2013 at 2:36 AM
Thomas Edward Gates
Good question. Without a witness to the agreement, it would be impossible to prove.
Answered on Jul 26th, 2013 at 2:36 AM