No schedule, no maturity date, and no reason it should be forgotten.
A demand note is a promissory note with no repayment schedule: the full balance becomes due whenever the lender calls for it. It is common between a trust and a beneficiary, between family members, and inside closely held companies. It ends when a demand is made and paid, when it is forgiven, or when it is offset against a share of an estate.
Most notes carry their own reminder. Payments fall due, someone notices when one does not arrive, and the obligation stays in view because the calendar keeps raising it. A demand note has none of that. There is nothing due on any particular day, so there is nothing to miss, so nobody looks.
That is what makes it the instrument most likely to be discovered rather than tracked: found in a file at a death, at a trust accounting, or during a divorce, years after everyone stopped thinking about it.
A demand note is never late, right up until it is called. Its record has to carry the obligation on its own, because the calendar will not.
In each case the lender is someone who will still be around to decide when to call it, and the borrower is someone who cannot easily be pressed. That combination is precisely why the terms should be written down.
Written demand, delivered how, with how long to pay. Follow the document rather than the habit.
Principal plus accrued interest per the note’s own terms, as of a stated date. This number comes from the note and, where appropriate, from counsel. It is not a figure to estimate.
The date is the fact that everything after it hangs on.
Paid, partially paid, disputed, renegotiated, or forgiven. Each is an ending or a new state, and each deserves a date and a document.
Recording a demand does not accelerate anything, adjudicate anything, or collect anything. It makes the ask visible and dated. What follows is between the people involved and their counsel.
The third line is the one that does the work. An obligation with no due date needs a review date instead, or the file goes quiet and the next person to open it is an executor.
The choice is usually made for convenience and has consequences that outlast the convenience. Both are ordinary instruments, and they behave differently in exactly the situations family loans end up in.
| Demand note | Term note | |
|---|---|---|
| When it is due | When the lender calls it | On the dates in the schedule |
| What keeps it visible | Nothing. It needs a review date of its own | The next payment falling due |
| Interest under the tax rules | Revisited annually, against a blended rate | Fixed against the applicable federal rate for its term at the outset |
| How default appears | Only after a demand is made and not met | A missed payment, visible immediately |
| Where it fits | Flexible family and trust lending, advances inside a company | A loan meant to be repaid on a plan |
A demand note is the friendlier instrument at the kitchen table and the harder one to administer for twenty years. If the money is genuinely expected back on a plan, a schedule does the remembering that a demand note leaves to people.
This is an explanation of how a transaction works, not legal or tax advice. Termn is not a law firm, a bank, an escrow agent, or a money transmitter, and it never holds your money. What is right for your situation is a question for your own counsel, who decides it and drafts the documents that carry it.
Termn records a demand note as outstanding in both parties’ records, indefinitely, until the demand is declared and resolved.
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The paperwork is not distrust. It is what keeps it a loan.
A signed trust that owns nothing does nothing. Funding is the transfer work.
The file is finished when a stranger can read it without asking anyone anything.
Papering a note to a family member so it survives review. Free PDF, emailed to you.
Everything else is in the learning center.
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