Received Demand For Repayment Of A "loan" That Was In Fact A Gift 21 Years Ago, Worth Pushing Back?

Before I even get into the situation, let me say that I have the money to give. It is more the principle and the fact that this is, in my opinion, lashing out due to political differences. They did this to my brother for a smaller amount for a similar reason last year. Hopefully this isn't too long.

Situation:

21 years ago, my mother and her husband gave us $5000 to assist with purchasing our home. I had been a loan officer in the past (not successful mind you, but I knew the law) and told them we wouldn't accept a loan because it is not allowed for closing costs or down payment. So, at that time, they made it very clear it was a gift. There was no documentation, there was nothing signed other than the check they handed us.

Since that time, it has never once been mentioned, and there has never been a single request for repayment of any kind, consistent, I would think, with a gift vs a loan.

On 2/13, I received a certified letter from him (not them) stating that they were severing their relationship with me and my wife. However, before they would consider it severed, they were DEMANDING (yes, all caps and underlined in the word processor printed letter) that I repay the LOAN (ibid) of 20+ years ago. I was given a deadline of 3/15, or he would file claim against me in Small Claims Court in my city/county (different state from them). Yes, I recognize there is a mix of "he" and "they". He uses the word they multiple times, but the handwriting on the envelope is his and it is only signed by him with his name at the bottom.

Questions:

Does he have any legal ground/standing?

Any thoughts on the likelihood he wastes money to file just to get thrown out by the magistrate (small claims in my state/county is seen by the magistrate)?

With no documentation and nothing signed, is there anything he can actually do to me? Lien on the house? Other legal action?

I'm not interested in a countersuit or damages, but whatever happens (whether I just pay him to get him out of my life or it goes to court regardless of the judgement), is there anything I can do to ensure no further contact and that he can't try to come after me for a Christmas Amazon Gift card or something equally ridiculous in the future? Yes, a restraining order has been mentioned to prevent contact, but I admit I haven't looked into that yet.

I know you don't have the whole story, but nobody wants to read the novel of "growing up with a narcissist" that this could very easily become.

Lastly...is it worth it to just send the certified check and be done with it?

For reference:
Statute of limitations for demand is 3 years in my state and 6 years in theirs.
Small Claims limit in my state is $10,000, theirs is $50,000, but the threat to sue specifically states the courthouse in my city.

Charlotte/NC