Jackson, MI asked in Real Estate Law for Michigan

Q: Do we HAVE to payback a gift with no documentation?

My MIL offered us money to buy a house. She paid for it, and had us leave her out of all documentation. Then, tells us she took a mortgage out on her own home to give us the money, and wants us to pay it back. We felt trapped and paid payments. Now she is talking about “pulling our house” because we were talking about a divorce. She threatened me saying that if I left my husband she would find a way to take my home. Do we have to pay her? There is literally no documentation proving we owe her and she insisted to stay off of all of the paperwork to avoid taxes and stuff. She is using the house like leverage and even though we are working it out I feel trapped and unsure what power she has over us.

Additional detail- there is no mortgage on our house, it’s fully in my husband’s name. The only mortgage is on her house in her name.

She chooses to threaten us when she doesn’t get “enough time” with our kids too. It feels like extortion.

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2 Lawyer Answers

D. Mathew Blackburn

Answered

A: She could sue for the money back but since there's no mortgage on the property she wouldn't be able to foreclose. She would have to get a judgement first and then try to seize property.

I would gather any documentation that shows the money was a gift or communications where no mention of a loan or repayment occurred and just be ready for a suit.

If she paid directly you may have issues with constructive ownership and if you made a series of substantially equal payments it may lend credence to the argument that the amounts were a loan.

It's ultimately going to come down to was it a gift or a loan.

From a tax perspective it doesn't matter for your end unless you're trying to deduct the interest. If it does get recharacterized as a loan she'll have some tax issues, failing to issue a 1098, not including interest in income, etc...

Bruce Alexander Minnick and Thomas. R. Morris agree with this answer

1 user found this answer helpful

Thomas. R. Morris

Answered
  • Farmington Hills, MI
  • Licensed in Michigan

A: If this was a gift, you do not have to repay it. If it was agreed to be a loan, she is entitled to seek repayment. But, even if it is a loan, it is not secured by a mortgage on the house and although she has remedies available, those remedies do not include "pulling" your house. If you applied for a mortgage to finance the house, was there a 'gift letter' provided to the lender?

After writing this I see that Mr. Blackburn gave the same answer. I agree with his answer.

Bruce Alexander Minnick agrees with this answer

1 user found this answer helpful

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