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Ask Dave

Did Dad Do Her Wrong?

Karen's father loaned her money to keep a business going. It was included in a bankruptcy. Her father deducted it from Karen's inheritance. Karen feels that's wrong. Is she?

QUESTION: Karen in St. Louis lost her father this year. Karen and her husband owned their own business 20 years ago, and it failed, causing them to go bankrupt. Karen's father loaned them money to keep the business going. It was included in the bankruptcy, and her father didn't accept that. He's deducted it from Karen's inheritance. Karen feels that's wrong. Is she?

ANSWER: Legally, he doesn't have to leave you anything in his estate. Legally, he gets to choose how much he can leave each of his kids and leave them different amounts. He left an equal share minus what you still owed. You're wrong. If he just decided he wanted to leave a different amount to each kid, that's his choice. It's his money. It's a little weird to decide that—obviously. Most people divide it up. But I'm aware of lots of estates where a kid gets nothing. It's not unusual at all for something like this to occur.

This was between you and your dad. You felt like the bankruptcy should have wiped off the debt. He felt like family was thicker than federal law, and you should have paid it anyway. That disagreement was never settled while he was alive. It was settled because he took it out—minus interest—from your section of the estate. You got the money. The money's in your hands. You just lost it, and I've lost money, too, so I understand that. It's not a fun thing.

It was his money to do with as he wanted. You certainly don't have any legal grounds to stand on whatsoever. Emotionally, he gave you the money, and he has the right to set the terms on that. That's one of the dangers in family lending. Your relationship was damaged the entire rest of the time. He felt like he had a kid that was a deadbeat. That may be overstated, but that's basically what he was saying.

I understand your frustration, but you feel like he took something away from you that was yours, and my point is it was never yours. It was his. It just hurts, though. It leaves a scar. It's one of the reasons you never borrow money from relatives under any circumstances. The best of intentions ends up in places like this right here.