In general, if you're going to "loan" money to family or friends, it's safest to accept you'll never see that money again. If you can handle fully parting with the money, all is good and well, but if you're actually expecting to see it again -- well, things can get complicated.
In a popular post on the AITA subreddit, a man asked if he was wrong for losing his family savings after he tried to help his parents. He wrote:
Couple of years ago we (M35 + F32) sold our house and moved to another city where we decided to rent for the time being. We ended up with close to $250k from the sale proceeds sitting in a bank and not doing much. The intention was to use it as a deposit for a new house one day, or for the kids education, or something else meaningful.
For us it's a lot of money. Neither of us is from a rich family and definitely were not given a kick start to life like some others. We worked hard to save for the first house deposit years ago and were really lucky that the housing market made us so much money in the end. It was a true life changer that opened us a lot of possibilities in the future. Or so was the plan.
Mid last year I found out that my father was looking to get a loan for what I thought was expanding his business and I figured that he was not very successful getting it from the bank. He's had a small metal works shop, making custom fences, letter boxes, kitchen benches, things like that. So I offered him the money as a loan for a year or until we need it.
He was a little reluctant at first but eventually agreed, and offered us some interest even and all looked rosy. Fast forward about half a year. Mid January my mom called me in tears that they had to file for bankruptcy because they had no more money. Like at all.
Their business was going south for a while apparently, they're owing money left, right and center and even had to re-mortgage their house, but all that only prolonged the inevitable. My heart stopped and sank, I feel their pain but I also knew that I'll never see our money ever again.
Of course we're not even registered creditors, we didn't have a formal loan document, that's not what you'd do in a family right? And even if we were proper creditors I doubt there'd be much left after everything else is paid. S#$t situation. Looking back there were many red flags that I didn't see. Money was never a welcome topic for discussion in our family, let alone money issues!
But I should have seen that they were stressed more than they used to be, they made a few remarks about their business being slow (but drew it to COVID and post-COVID economy), and even mentioned something about potentially selling their house. But they never elaborated on that and I never asked because you know, talking money was kinda taboo.
Obviously my wife is now mad at me, and I can understand it. I feel terrible. I robbed my family off a brighter future, we could have had a much easier life with so many opportunities and instead we're back to where we were 10+ years ago. But this time on a single income (wife's on parental leave) with kids and a huge bitter argument tearing us apart as a family.
TL;DR - AITA for using our family "better life fund" for trying to help my parents and lost it all?
"We didn’t have a formal loan document, that’s not what you’d do in a family right?"
Wrong. You openly admit that neither you nor your spouse come from a wealthy background, yet you’d give someone a quarter of million dollars just…because?
"Money was never a welcome topic for discussion in our family, let alone money issues!"
This isn’t helping your case. It’s making things worse. Not only were you financially irresponsible, you did so knowing full well that family finances was a communicative black hole for your family.
"I robbed my family of a brighter future"
At least you admit it. I cannot fathom what was going through your mind when you decided—without so much as asking your wife—to take a quarter of a million dollars out of your joint family savings and give it away. To do so without so much as a piece of paper to evidence the loan is egregious. YTA. Hugely.
Big time YTA. All the flags were there waving in the wind. There was a reason the banks would not let them take out a small business loan. Because the banks asked the right questions and looked at everything and they decided there is no investment in a failing business. OP just threw money into a hole not knowing how deep it actually was.
You always create a paper trail for the money you lend out. Family or not. It is good business and financial sense. No loan documents, no loan. Especially for that kind of money. This wasn't a $500 loan to float someone. Both OP and the wife have no one to blame but themselves. They squandered their savings and their future.
Obviously YTA. Did you even consult with your wife about loaning the money to your parents, or was she blindsided by this? Also, yes, you do have formal loan documents with family. Especially when you are talking about $250k. Especially when in your family you don't talk about money or money issues.
“I never asked because you know, talking money was kinda taboo.”
You actively loaned your parents hundreds of thousands of dollars for a business you already knew was failing and that banks opted out of financing while neither doing due diligence beforehand nor keeping abreast of their situation afterwards. Why are you even asking if you’re the AH?
YTA. I’m perplexed about a few things. Why would you even need to ask if you were wrong? You took joint family money behind your wife’s back and used it without consulting her. Why would you offer money to someone already turned down by banks? Why would you lend that much money to anyone without a firm written payment plan?
Why would you make such a huge unilateral decision without ever mentioning it? Why would parents do such a thing to their child? They knew that the business was in rough shape and that they were horrible with money. They knew…
You need to examine your whys. If only to make sure you don’t repeat this behavior. This is a huge breech of trust in your marriage. And the consequences are ones your wife is going to have to help pay for. It is also a huge misplacement of trust in your parents whom you’ve know your whole life. Something new could be going on with them. But usually people don’t get this irresponsible overnight.
UPDATE: Yes wife knew about it, it's not that I took the money without her knowing, but she was heavily pregnant and didn't really care much back then.
The edit is even worse. She was obviously dealing with a lot and trusted OP. I’d be divorcing as soon as the pregnancy fog cleared - OP is an actual moron.
How terrible a business must it have been to blow through 250k a year?
As I now understand they mostly used it to repay some existing more pressing debts.
YTA. It may be hard to refuse a loan to a parent if they asked but you say they didn't even ask, you offered them and they refused and you offered them again. I suppose your dad knew it was risky and didn't want to do it to you, but without being able to openly talk about money you couldn't really discuss it. In the end you ruined your family future. Well done.
YTA - for not doing your due diligence and reviewing the financials of your father’s business. Your father is an even bigger AH for not admitting to you how bad things were and refusing to take your money.
I’m not sure what kind of validity you’re looking for. You’re an idiot. Why on earth did you not look into financials? I mean 250k? That’s mind blowing.
Well, this is a unanimous YTA, that's for sure.