DEAR JEANNE & LEONARD: My sister, who has always made life choices that are detrimental to her financial well-being, lives on Social Security and has no assets to speak of. Still, she's determined to buy a house. Moreover, she has found a bank that will give her a mortgage -- provided the down payment is a gift from a family member and not a loan. She has also found a friend who's willing to lend her the money for the down payment. So to get around the bank's rules, she wants this friend to give me a check for the amount she needs so that I can then write the bank a check for the down payment. I'll also have to certify that my check was a gift, not a loan. To me, this sounds like fraud. But my sister says there's no risk and that helping her won't cost me a dime. Your thoughts?
-- Chris
DEAR CHRIS: We think you need to reread the first sentence of your letter and decide if you want to join your sister on the path of poor life choices. Because what she's asking you to do is indeed commit fraud.
Sure, the bank may be happy to give her a mortgage now. But come the day she's delinquent in her payments, it won't take them long to uncover her scheme and to look to you to make them whole.
Then there's her friend, who'll have a canceled check endorsed by you. Who do you think she's going to come after if your asset-less sister is slow in repaying her?
The bottom line: Don't walk away from this deal -- run!
DEAR JEANNE & LEONARD: My mother's will calls for her estate to be divided equally among her seven children, but three of the seven owe the estate money from loans Mom gave them. Is there a formula for dividing up the estate under these circumstances?
-- J.S.
DEAR J.S.: Get out your calculator -- here's the formula: Add to the value of the other assets in your mother's estate the sum of the outstanding loans. This gives you the total value of her estate. Divide this amount by seven (i.e., by the number of children). This gives you the amount of the bequest to which each child is entitled.
The four who do not owe the estate money should receive that amount; the other three should receive that amount minus the amount of his or her loan.
So, for example, suppose your mother's estate is worth $130,000, not counting the loans, and you have siblings who owe the estate $5,000, $3,000 and $2,000. Adding these loans to the other assets in the estate makes it worth $140,000, meaning each sibling's share is $20,000. The four who owe the estate nothing should each get $20,000. The other three, after having their debts subtracted from $20,000, should receive, respectively, $15,000, $17,000 and $18,000. That means $130,000 is being distributed, which is the amount available in the estate.
FYI, debtors: You are receiving a full $20,000 share. Some of it, however, is going to repay your debt.
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Family on 09/28/2016