Dear Jeanne and Leonard: When our longtime friends, “Eric” and “Claudia,” started a business a few years ago, my husband and I decided to make a substantial investment in it, taking a second mortgage on our house to raise the money. Unfortunately, the business ultimately failed. Eric and Claudia lost everything, and we lost all the money we had invested, too. The thing is, Eric and Claudia are once again doing well, while my husband and I are still paying off the loan for our home. As our close friends, don’t they have a moral obligation to pay us back at least part of the money we lost?
– J.G., Greater Kansas City Area
Dear J.G.: Only if they’d held a gun to your head and forced you to put up the dough.
We realize that having a big investment go south is a terrible thing. But unless you’ve left something out of your story – say, some unethical dealings on the part of your friends – then Eric and Claudia owe you no more than their regret that you lost your money. After all, they lost their money as well. The fact that they’ve been able to get back on their feet faster than you doesn’t put them in your debt or somehow make you their victims.
Bottom line: Your friends are not obligated to start paying off your mortgage simply because you made a bad bet, even if the bet was on them.
Dear Jeanne and Leonard: Our daughter has just graduated from college and is living at home with my husband and me. Money seems to slip through “Jessica’s” fingers, and our advice to her about money management falls on deaf ears. She wants to get a full-time job and an apartment, but she has so little money sense that this seems like a fantasy to us. How can we help Jessica reach her goals?
– B.C., Sacramento, Calif.
Dear B.C.: Nobody ever learned to earn or save by being dependent on their parents. If you want your daughter to learn to be responsible about money, insist that she get a job, any job, and don’t give her any financial assistance until she finds one. Then work out a budget with Jessica so she can see where her paycheck has to go.
What can you do after that to help your daughter? Let her stub her toe financially a few times. Some people understand money early. But plenty also need a few lessons from the school of hard knocks.
Dear Jeanne and Leonard: I recently discovered that a couple of years ago my baby sister asked our widowed mother to take out a mortgage on Mom’s fully paid-for home and to give the money – $150,000 – to my sister and her husband to use as a down payment on a home they wanted. Mom agreed, and my sister, “Tina,” signed a document acknowledging that the money was a loan.
My question is, What will happen to this loan when my elderly mother dies? Will Mom’s estate still be split equally among the five siblings, Tina included, as Mom’s will calls for?
– Felicia, Los Angeles
Dear Felicia: Debts don’t disappear just because someone dies. After your mother’s death, Tina will owe your mother’s estate whatever portion of the $150,000 she hasn’t already repaid. And the debt will be taken into account in calculating the equal distribution of your mother’s estate.
Two things, though: First, all states have statutes of limitation on debts. So check with a lawyer to see if there are steps that need to be taken to ensure that the note your sister signed remains in force. And second, do everything you can to find out whether your close-mouthed baby sister has gotten any other loans from your mother. That’s not something you’d want to discover after the estate has been settled.
Please email your questions about money and relationships to Questions@MoneyManners.net.