My brother won’t help Mum. Should she change her will?
Does the will have to be changed or will a simple letter do the trick?
Dear Ms Wise, my elderly mother needs help with her bills but my brother won’t contribute, even though he has the means. Can I ask her to change her will so I’m properly compensated for money I give her? The sale of her home is likely to leave us with an inheritance. Ed
The wisdom: A first step, suggests Tim Johnson, a financial planner with Bridges Financial Services, is to discuss what you and your mother expect from this arrangement. This would establish whether you both agree that the contribution should be repaid or whether your mother sees it as a gift.
It’s vital to keep clear records of what is spent on her behalf. Michaela Pollock
“If your mother intends to compensate you, seeking advice from a lawyer should be the next step,” he says.
This will ensure your mother receives the necessary legal information to make an informed decision and understand her options, he adds.
“The lawyer may wish to speak to her without you present to help validate decisions are made without undue influence. This could include formalising a loan agreement or, as you’ve suggested, making changes to her will.”
The best way to ensure the money spent is repaid upon the mother’s death is by setting up a loan agreement between the two of them, says Michael Crowe, national manager of estate planning at Equity Trustees.
“On the mother’s death, the executor, when administering the estate, is required to repay any outstanding debts,” he adds. “The mother’s will does not need any amendment if a loan is put in place.”
Lawyer Peter Townsend, principal of Townsend Business & Corporate Lawyers, argues that all that is required is a letter signed by the mother.
“There is no need to change the will,” he explains. “What’s important is to ensure that mother understands that any money spent on her behalf is money lent to her.”
He says a formal loan agreement is unnecessary.
“Ed could write her a letter, saying he knows she’s having a few problems with bills and that he’s happy to lend her money on an on-demand basis, interest-free, and that it can be repaid from her estate eventually. Mum would sign the letter to confirm any money advanced to her is considered a loan repayable by the estate,” says Townsend. The assumption here is that the mother has full cognitive function.
Once the mother has signed and dated the letter – preferably with a witness – this creates a debt, which the estate has to pay by law after her death.
Crowe says it’s important that the mother and son keep clear records of money spent on her behalf. “If the will is challenged, it will not affect the estate’s obligation to repay the amount owing to the son,” he adds.
Got a money-related problem around friends, family and relationships that you need help with? Please email mswise@afr.com. We will get experts to answer your question and keep your name and details anonymous.
This article is for general information purposes only and is not intended to be financial product advice. You should always obtain your own independent advice before making any financial decisions.
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