<p>I am not truly confident on all the legal issues here, but if this were my case, I would have no problem asking #1 for a low interest loan. This way, the money remains his and he is making some return and knowing that he is helping out family. Not a gift, but an invertment. #1 also must realize that this money did not just appear out of the blue and, if I read correctly, did not earn that money all himself. Therefore, putting together a low interest loan package everyone wins to some extent.</p>