Creditor passed away

[Mary Snelling]

Jurisdiction

Wisconsin

My aunt (to whom I was very close with) gave me an interest free business loan a few years ago. I have been diligently paying her back every month. A few weeks ago my aunt died without a will. Since she did not have a will, her assets will go to her children, my cousins. My cousins are aware of the loan that we had.

My question is what happens to my loan? I assume I have to pay the loan back, which I am fine with. But I don't have the money to pay it back to her estate right away, it will take me at least 2-3 years to pay it back. Will I now be paying my cousins or will the loan be called?
If it's called I won't be able to pay it immediately

 

[army judge]

My question is what happens to my loan?

Condolences upon the passing of your loved one.

The heirs MIGHT forgive the loan.
The loan obligation didn't die with the death of your loved one, it lives via the estate.
I suggest you discuss the matter with the administrator of the estate, once the person is named and known to you.
Bottom line, many things can happen with the loan, things that ONLY the administrator of the estate (and the heirs) know.

Will I now be paying my cousins or will the loan be called?

Yes, that might be a possibility.

You can assuage your curiosity by speaking with the RIGHT people, as strangers know less than you do.

 

[adjusterjack]

I have been diligently paying her back every month.

And now you can't?

Why not keep writing your monthly checks to "The estate of........" and send them to the administrator of the estate.

 

[PayrollHRGuy]

You have my condolences as well.

Was there a written agreement as to the terms of the loan?

 

[Mary Snelling]

Condolences upon the passing of your loved one.

The heirs MIGHT forgive the loan.
The loan obligation didn't die with the death of your loved one, it lives via the estate.
I suggest you discuss the matter with the administrator of the estate, once the person is named and known to you.
Bottom line, many things can happen with the loan, things that ONLY the administrator of the estate (and the heirs) know.



Yes, that might be a possibility.

You can assuage your curiosity by speaking with the RIGHT people, as strangers know less than you do.

Thank you for the advice. I am somewhat close with one of my cousins but I have not spoken to the other two much since we were young; so I don't know how likely they will be to forgive the loan. What if one of them agrees to forgive it but not the other two?

 

[Mary Snelling]

And now you can't?

Why not keep writing your monthly checks to "The estate of........" and send them to the administrator of the estate.

I can keep paying, and I plan on continuing to pay. I am just worried about what will happen through probate and how I cannot pay the total amount all at once.

 

[Mary Snelling]

You have my condolences as well.

Was there a written agreement as to the terms of the loan?

There was no written agreement or written terms. She offered to give me the loan without interest instead of going to a bank and then we agreed on how much I would pay every month.

 

[army judge]

There was no written agreement or written terms. She offered to give me the loan without interest instead of going to a bank and then we agreed on how much I would pay every month.

If there is NO written contract, the estate would have a very difficult time CALLING THE NOTE, or suing you to repay the loan.

 

[Tax Counsel]

There was no written agreement or written terms. She offered to give me the loan without interest instead of going to a bank and then we agreed on how much I would pay every month.

If the agreement was that you'd pay it off with monthly payments of $X a month then that's what the estate — or the beneficiary who gets the debt in the estate distribution — is entitled to get. Without a provision to accelerate the loan they could not call it all due now just because she died. So unless the estate or beneficiary is willing to forgive the loan I'd expect that you'd just continue to pay it off with the monthly payments.

 

[zddoodah]

My question is what happens to my loan?

Nothing. The only difference is that you now owe her estate instead of her.

I assume I have to pay the loan back, which I am fine with. But I don't have the money to pay it back to her estate right away, it will take me at least 2-3 years to pay it back. Will I now be paying my cousins or will the loan be called?
If it's called I won't be able to pay it immediately

Unless you have a written loan agreement that expressly states that her death accelerates the loan such that the balance becomes immediately due and payable, her death does not change the terms of repayment.

I am somewhat close with one of my cousins but I have not spoken to the other two much since we were young; so I don't know how likely they will be to forgive the loan. What if one of them agrees to forgive it but not the other two?

This is not something that's subject to a majority vote. What you need to understand is that her assets don't simply pass to her children, and none of her children presently have any authority to do anything with respect to her assets (including your debt to her).

Let's say you just stopped paying. Her children would not have any standing to sue you. Rather, one or more of them would need to be appointed by the court as executor/administrator of the estate, and that person (or persons) would have authority to sue you on the estate's behalf.

 

[welkin]

Why not keep writing your monthly checks to "The estate of........" and send them to the administrator of the estate.

I would just keep making payments to payee that you have always paid to and let the
cousins figure out how they will get those checks cashed or put into an estate account. I'm sure they will be in touch.