A few ideas.
I suggest it would wise to consider what lesson is learned as a result of any resolution of a financial issue. Is it a lesson of responsibility and of the importance of keeping one's word, or of getting away with whatever happens (poorly planned business) with no adverse consequences. "No" consequences (e.g. forgiven loan) is also a consequence, and it sends a message.
Sounds like paying the loan from your savings automatically means it's deducted from inheritance, since the savings are part of that inheritance. This may seem like a square deal if we ignore inflation. Assuming Today the $54K is worth much more than, unless it is adjusted for inflation, the same $54K will be worth (i.e. will allow to buy) a few decades from now, when the inheritance materializes.
So this option means your son is foregoing a significantly smaller financial loss in the future in exchange for foregoing his debt completely today. This is like borrowing $54K from a bank now, and only having to forego the same amount decades in the future when it is in fact worth much less. What borrower would not be happy with such arrangement, and what lender would do it? Only one's own loving parents :)
- Interestingly, one approach nobody has suggested is for you to legally transfer the $54 debt onto your son's family, since in fact it is now HIS debt. For instance, he could take an equity line on his house (if he has one) and use it to pay down your debt, then start paying off his equity line. There are probably other options also. Why not? Because they "need every penny." In the real world, one's needs are not a valid excuse for financial irresponsibility. In the real world needs are adjusted in line with capabilities that take into account one's financial obligations. If your son becomes a legal owner of the $54K debt, he will have to learn to adjust his family's spending and lifestyle to accommodate both the principal and interest payments. This will teach him many valuable lessons:
- (re)balancing his checkbook;
- being responsible for his financial decisions and obligations;
- not making financially burdensome decisions (e.g. starting a family and having children) until he can afford it in light of his other financial obligations;
- honoring his parents by assuming the responsibility for his own (risky) financial decisions, rather than transferring the responsibility for his mistakes onto the parents.
You are in charge of what life lessons your son will walk away with from this situation. Good luck!