[Dueller]

Families and money...what a mess. Let me share with you a scenario and ask how you would handle it.

My parents are comfortably retired, in relatively good health in their mid 70's. They have 2 children, my brother (45) and me (50).
Thru a frugal lifestyle and some inheritance, they have two farms, a nice country home, and no debt. Their monthly after tax income is c. $12K. They live a relatively modest lifestyle spending about $2500/month. Current real estate is valued at c. $1M. Current liquid cash assets are approximately $1M also, but growing because they are saving an additional $80-100K per year. Catastophic medical or extended skilled nursing care is not an issue...they are insured to the hilt. All a blessing as I have several friends who are having to help support their parents.

My brother is a veterinarian. A few years ago he sold his practice for a tidy profit and became a college professor practicing veterinary medicine on the side. As a result he took a pretty good cut in pay. He has 2 failed marriages,, 2 children from his second who live with their mother. Here's where it gets weird. He reconciled with his first wife, didn't remarry her although they live together. She turned up preggers and they now have a beautiful 3 y.o. dtr. He won't marry her likely because he feels like she trapped him with this pregnancy...won't go into the details but suffice to say I think he's correct. E.g. she refuses to work even parttime to support the household, etc.

I'm remarried with no children other than teen step children which are solely supported by my wife and her ex. I make a decent living as a country lawyer, my wife works full time. We live well within our means and we pay cash for our home, cars, vacations etc.

About 3 years ago, my brother decided to buy a rural home with acreage. He finds a 4500 sq ft home on 39 acres with a pool, outbuildings etc. The purchase price is $400K. He signs a contarct planning to put $200K down and finance the rest. Because of a delay in the closing it spanned a new tax year and
suddenly can't get approved for the $200K loan due to his decreasd income despite his credit being perfect. My parents agree to lend him $200K short term while he straightens this out.

When it becomes apparent that he's not going to get permanent financing to pay them back, my dear sweet mother drafts a note at 3% interest on the $200K.

Now, let me say my parents are very generous to us and have always treated us fairly and equally. We each receive a gift of the maxuimum allowed amount to avoid estate and gift taxes each year as part of their estate planning. But they have now decided to just withhold his annual interest payments from his gift...so instead of receiving $12K each year, they only give him $6K (with $6K being the interest on the 200K at 3%).

As an attorney, I know this is a cluster fock waiting to happen. The "note" my mother drafted is completely unenforceable and violates a number of IRS regs. Given that there is no valid mortgage my parents are completely unprotected in the event something happens to my brother. Basically the home would go to each of his three kids unencumbered and the two ex's would be up in the middle of it all under the guise of protecting their children's rights. I could go on ad naseum...suffice to say there are bad legal consequences for everybody concerned.

All of the above was done above board with full disclosure to me. I strongly suggested that they hire an independent CPA/atty to set it up properly. When they didn't, I sent all of them a letter(including my brother) with my concerns of the legal /tax consequences with absolutely no mention of how I'd possibly get screwed . I never suggested they offer me the same "deal." My parents appreciated my concern but took the attitude that "we appreciate your concerns but, well, its already a mess so we'll just leave it like it is. We wished we hadn't done this,,,but its done now...yadadadada. "

Sorry for the length of this tome....here's where it is now:

1. Even though I've dropped it, my parents constantly remind me that if something happens to them that they've made provisions for me to receive an extra $200K. This bothers me and I've thanked them but asked they just quit reminding me.

2. Despite my requests to not involve me, my mother wants to call me and complain about something my brother is doing with his finances and bring the conversation back around to the loan.

3. Alfter no one wanted to see an independent CPA/atty and didn't want to listen to my suggestions, I've dropped it with all of them. However, it is causing tension between my brother and I. E.g., out of the blue he tries to convince me the interest he is "paying" will help increase my parents estate and I'll benefit when they die. Or if he buys a new car or takes a vacation, he feels a need to explain to me why/how vis a vis not being able to pay my parents back.

4. Ultimately all their talk comes back around to I'll benefit when my parents die...and that is a morbid thought I don't want to think about.


Sorry I've rambled....there really is nothing I can do about this mess, and its their money so I really don't have a say so. But they keep bringing it up no matter what tact I take to change the subject. I've tried to addrsess it head on, but that clearly didn't work.

Any suggestions?