Parents may wish to give a child financial help by loaning money to the child, with the intention that the loans be repaid – or charged against the child’s inheritance – at the parent’s death.  In order for this intention to be realized, the loan must be made with the appropriate repayment terms and the parent and his executor must timely monitor the debt repayment.  Failure to do so may result in a dispute like the one between two brothers recently decided by a Mississippi court.
Facts:  Thomas Sr. made a series of loans to his son, Timothy.  Thomas Jr., as executor of his father Thomas Sr.’s estate, sought repayment of these loans from his brother, Timothy.  The chancellor held that Timothy had to repay $91,700 – the amount of the loans not barred by the statute of limitations – before he received his distributive share of the estate.  Timothy appealed.
Analysis:  While Timothy conceded the checks from his father were loans, he argued that these debts were not recoverable in the estate matter.  He argued that because Thomas Jr. never filed a separate legal action in circuit or county court, all of the loans are barred by the three-year “statute of limitations” (period of time allowed for filing a lawsuit to recover).  Where a legal claim arose during the lifetime of the person entitled to bring a suit, and no suit is brought during his lifetime, the running of the statute of limitations is not interrupted by the death of the party who has a right to sue.  The court found there is no exception for an heir’s debt.  Thus, the statute of limitations on Timothy’s debts ran continuously from the time they became due during Thomas Sr.’s lifetime.
There is a general statute of limitations under Mississippi law of three years.  There is also a specific three-year limitations period for “unwritten contracts”, which is what these loans appear to be.  The chancellor concluded that the three-year statute of limitations began to run on the day each loan was made.  The court found no evidence of when these loans had to be repaid.  And with no later repayment date to point to, it makes sense that the only accrual date that can be applied is the date the loans were made.  Thus, the claim for recovery of those loans made more than three years earlier was not proper.  By the time Thomas Jr. asserted the estate’s claim to repayment of the debt, more than three years had passed since Thomas Sr. had written half of the twenty checks.  So recovery of these ten loans is clearly barred by the running of the three-year statute of limitations.
The court also found that the issue of an heir’s outstanding debt to the estate belongs to the estate matter.  Thus Timothy was wrong in arguing that a separate legal action should have been filed to collect these debts.  Since the estate matter was a proper place for Thomas Jr. to assert the estate’s claim to repayment, it necessarily follows that Thomas Jr.’s assertion of this claim did in fact stop the running of the statute of limitations for the ten still-recoverable loans. Therefore, the other ten loan checks written by their father to Timothy within the last three years were recoverable from Timothy against his share of the estate.
(Kennedy v. Estate of Kennedy, No. 2013-CA-01349-COA,  http://courts.ms.gov/Images/Opinions/CO97020.pdf)
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