Sunday, September 11, 2011

Stiffing Bank of Mom and Dad

I previously wrote that my Snowball Plan will come to a screeching halt now that I'm purchasing a condo. In actuality, I've just revised my Snowball Plan, yet again, to include my anticipated new debts: my mortgage and the down payment lent to me by Bank of Mom.

Come 10/31/2011, my debts will look something like this:


Fed'l Sub'd Student Loan

$ 50,558.49

@ 5.125%



$ 274,000.00

@ 3.875%


Down Payment

$ 68,500.00

@ 0.000%



$ 393,058.49

Based upon these estimates, here's my new Snowball Plan ver. 3.0.

I know that the "real" Snowball Plan requires me too pay off my debts in the order of the smallest balance to the largest. I do plan to pay off my smallest debt first, but I'll also be snowflaking $4,000/year to my Bank of Mom debt.

Some would argue that the $4k/year snowflake should be applied to my student loans instead of to Bank of Mom. But I feel that Bank of Mom deserves the not-so-insignificant snowflaking since she was generous enough to lend me the money interest-free. Additionally, my mom's 69. God knows how much longer she'll live. She got a relatively clean bill of health recently so I'm thinking that she'll be good for at least another 10 years. Hence, my goal is to pay off Bank of Mom in 10 years. I guess I should also be prepared to make a balloon payment for the balance in the event my mom's health deteriorates prematurely. The bottom line is, I intend to take my debt to Bank of Mom seriously and will treat it no differently than any other debt to a "real" creditor.

I'm going to switch gears now and I'm going to engage in some catty gossip. My best friend recently confided to me that she and her husband also "borrowed" approximately $20,000 from the husband's parents for their down payment. It's been 8 years and they've paid back $0.00 so far. In the mean time, they've taken vacations, bought a new car and made improvements to their house. My BFF claims she feels guilty for stiffing the in-laws, but not guilty enough to initiate a repayment plan. My BFF further feels that it's her husband's responsibility to make the repayment arrangements since they are his parents.

I'm appalled at my friend's cavalier attitude about how she and her husband are stiffing Bank of Mom and Dad. I guess since her in-laws haven't said a "peep" about being repaid, perhaps the in-laws intended to "gift" the money. Either way, the issue has been swept under the rug and no one is dealing with it.

I'm a bit disappointed with my friend. No matter how you slice it, she and her husband are deadbeats. They're deadbeats because they're stiffing their family members on a significant sum. Even assuming that the in-laws were willing to gift the money, my friend and her husband are deadbeats since they didn't pay taxes on the non-exempt portion of the amount that was gifted to them.

I wonder if the in-laws have forgotten about the "loan"? Or I wonder if it will always stay in the back of their minds that their kid and his wife stiffed them?


Michelle P said...

I don't think that's right that they have taken vacations and so on and have not paid a dime back. That shows no respect and his parents definitely won't forget that. How can they be so mean?

susanb said...

They didn't need to pay taxes on the non exempt amount because it was all exempt (if it was indeed a gift - and the bank probably asked for a gift letter so the repayment amount wouldn't be included in the calculations). They could've qualified for a gift of like $40,000 without tax (each parent can give up to 10k (13 k now - not sure what it was back then) to both the wife and the son. 4 x 10,000 = $40,000 is tax exempt.

However, the parents are probably seething. My parents loaned my sister her down payment. They then said she wouldn't have to repay it but the amount was taken into account in my parents will. At least it was communicated!

Well Heeled Blog said...

I would think that money to family would be the FIRST loans to be repaid - you can stiff the bank and suffer consequences to your credit, but stiffing family ruins relationships.