Do I Really Have to pay That Back?

Estate planning clients often ask me how loans they have made to friends and family members should be addressed in their Wills. Since a private loan is simply an agreement between individuals, there is no right or wrong way to deal with loans when the lender dies.  The intent of the parties as expressed in the loan document controls. But, what if there is no loan document, or the document does not address what should happen in the event of death?  If there is no writing evidencing the loan, or the writing is silent as to what happens in the event of the lender’s death, the executor will have to look to the terms of the Will for guidance.  If you made a loan but neglected to address what will happen upon your death, you should include in your Will instructions for how your  executor should handle the loan. Do you want the loan forgiven?  Do you want the payback accelerated? Do you want payments to continue being made to your estate on the same schedule that was in effect during your lifetime. There are clearly pros and cons to each approach but, the important thing is to make your wishes known. Uncertainty is sure to create problems for your executor.

Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.