How to word agreement to guarantee repayment of loan in the event of borrower’s death?

UPDATED: Aug 25, 2011

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How to word agreement to guarantee repayment of loan in the event of borrower’s death?

A relative is trying to pay off credit card debt, however of one negative item on her credit report she can’t get a typical loan. The bank will make a loan if it is secured by a third party with the matching funds in a frozen account. I am trying to remain an anonymous third party; and as she has significant health problems want to ensure if she defaults on the loan that I would be reimbursed from her estate in the event of her death. How would such an agreement be worded to be legally sound?

Asked on August 25, 2011 Tennessee


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

In order to safeguard your loan with this relative in the event of her death so that you are guaranteed its repayment from funds in a frozen bank account you need to do the following;

1. have a written agreement signed by you and this relative setting forth the basis for the loan, when it will be repaid, any bearing interest, and principal amount. Signatures on the document should be notarized. The agreement needs to state that the money will be placed in a frozen bank account in your and the relative's names as "joint tenants with the right of survivorship."

2. have a promissory note created and signed by the relative memorilaizing the terms of the loan payable to you. If the note can be secured, the better.

3. have the bank account funded as a "joint tenancy" account as stated in item number one above.

You should consult with an attorney to assist you with the above suggestions.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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