Twenty years ago, my sister’s husband left her. She had two small kids, and lots of debt. I was in the position to loan her money to pay off those debts. Their divorce decree mentioned that each was to pay me back half. Of course, they never did. Fast forward to now. Her current husband died leaving her over $250,000. Still, she hasn’t offered to pay me. Can I legally go after her for it?
Sister Left Out of Pocket
Lending money should never be treated lightly. When you loan people money — including and especially — family members, sign a loan agreement, spelling out the amount of money you are lending, and the period of time you would like it back, how it should be paid back (in installments or a lump sum), whether there is any collateral, plus interest and late fees. That’s a lot, isn’t it? Especially for siblings. But it also reflects the seriousness of the transaction, and reminds both parties that it’s not one that should be taken lightly. If you are lending $50,000 to a friend, family member or business partner, you need to have your John Hancocks in black and white.
But could this be seen as proof of a loan being made to your sister and her ex-husband? John Lambros, an attorney with Brinkley Morgan in Fort Lauderdale, Fla., is conflicted over whether this would help you in your endeavors to get this money back. “The sister, who is owed the money, is not a party to the divorce decree,” he says. “So it is unlikely, if not impossible, that she could sue over a breach of the divorce decree. Presuming the loan was in fact made, the divorce decree could be utilized as a demonstrative piece of evidence that her sister and husband acknowledge the debt owed to her sister.”
It’s a messy situation, and a complicated one, given that you don’t mention anything about any party having signed a loan agreement. “The sister would likely have better results suing based upon a breach of contract, that is, a formal loan being made and unpaid, or through the equitable route of unjust enrichment — that she provided a benefit without being compensated,” he adds. “She would not have a basis to sue under the divorce decree, but it would certainly be helpful if she sued through the proper channels referenced about.” Lambros practices family law, and stresses that this would be a civil action outside of the family law remit.
Randall Kessler, a divorce attorney based in Atlanta, Ga., was slightly more optimistic in relation to your case. “This person should be considered a third-party beneficiary and they will likely have rights and consult with a lawyer immediately,” he said. But he is skeptical as to whether this could be enforced through a court order, given that it’s a divorce decree between your sister and ex-husband. “Even if not enforceable as a court order, a contract lawyer might be able to sue on the contract if the parties actually agreed and signed it. Oftentimes, things that courts won’t enforce as a court order, can be enforced separately as a contract.”
In the event that you could prove that you gave or lent your sister money, where is the evidence that she must pay you within a certain time period, and that she agreed to repay the full amount? Given that your sister has inherited $250,000, your best chance of seeing this money again is to first approach her with your request, politely and directly, and implore her to do the right thing, and remind her that you helped her and her then-husband out when they were in a difficult spot, and in need of money. Try the path of least resistance before engaging lawyers and the courts.
Also from Quentin Fottrell:
You can email The Moneyist with any financial and ethical questions at email@example.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter. The Moneyist regrets he cannot reply to questions individually.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, or weigh in on the latest Moneyist columns.
By emailing your questions to the Moneyist or posting your dilemmas on the Moneyist Facebook group, you agree to have them published anonymously on MarketWatch.
By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.