Loan to elderly relative
Discussion
James_B said:
Is it a gift or a loan? If you don't expect repayments then it looks like a gift, so would likely be assessed as her assets for purposes of care costs.
As far as we're concerned it'd be a gift, however we'd rather it wasn't used to fund her care (if need be) So would like to make it a loan. We could set it up with a small regular repayments if this was a prerequisite. Just wondering how easy this would be?
Dixy said:
What will she spend it on.
She's looking to sell her flat and buy a park home, a few extra sheckles would buy a better one. I know financially park homes are crap but it's her money, and her life. Once she's got her mind set on something it's difficult to talk her out of it.
We just want her to be as comfortable as possible in whatever she does during her last decade (or two)
Yes, it is possible, if you make the loan a first lien secured mortgage on her park home. Then, if it needs to be sold to raise funds for care, you would be paid first.
Would obviously need lawyers involvement to draw up such a mortgage agreement (could be interest only?)
Note you would need to declare and pay tax on interest payments on the mortgage that she pays you
No idea of implication if you make it an interest free, interest only mortgage!
Would obviously need lawyers involvement to draw up such a mortgage agreement (could be interest only?)
Note you would need to declare and pay tax on interest payments on the mortgage that she pays you
No idea of implication if you make it an interest free, interest only mortgage!
Edited by wisbech on Thursday 10th August 07:55
PositronicRay said:
Up to £50k
85 y/o MIL in good health.
We don't expect repayments but are sole beneficiaries of her will. Would it be possible to "ringfence" the loan in case her assets are required to pay for care fees?
If so is it a simple document or would we require a solicitor to draw it up.
Simple loan agreement (get a solicitor to do it). Don't charge interest. Sum repayable on death of borrower or sale of property.85 y/o MIL in good health.
We don't expect repayments but are sole beneficiaries of her will. Would it be possible to "ringfence" the loan in case her assets are required to pay for care fees?
If so is it a simple document or would we require a solicitor to draw it up.
NorthDave said:
Could you she not sell her place and gift you the money? You could then buy whatever suited you all and retain ownership.
AIUI as long as she lives 7 years then all is good?
That's a massive can of worms. 7 years relates to IHT which doesn't sound like it's going to be an issue here, but what you suggest would almost certainly be regarded as 'deprivation of assets' and that has no time limit. It would be especially galling to be hit with that if you'd bought her a replacement property.AIUI as long as she lives 7 years then all is good?
NorthDave said:
Could you she not sell her place and gift you the money? You could then buy whatever suited you all and retain ownership.
AIUI as long as she lives 7 years then all is good?
If you're saying what I think, i.e. buy her a property with the gifted money and let her live in it whilst she needs it, that would be a gift with reservation and as such the 7 year rule does not apply. It always stays as part of her estate. However, if her estate is likely to be below the IHT threshold then this is not a problem.AIUI as long as she lives 7 years then all is good?
POAT may also come into play for the MIL.
In addition, assuming the OP didn't live in the property all the while they owned it, CGT may come into play when they want to sell it.
With regard to depravation of assets, I'm not sure how the council would view reducing her assets by the value of a loan from a related party, e.g. family member. I suppose, if she has no family history of care home needs and her medical records show her in good health, it would be hard for the council to prove deliberate depravation.
Edited by uknick on Thursday 10th August 17:24
Edited by uknick on Thursday 10th August 17:29
Thanks chaps
If we do it it'll be an interest free loan drawn up by a solicitor.
I don't want to get into "gifting" and buying a static. (even though capital gains is hardly applicable on a Park Home)
In all honesty I don't really care if she pisses the money up the wall, as long as she has a ball doing it. I just didn't want the money to go in care home fees if the worst should happen in a couple of yrs before she's had a chance to enjoy it.
If we do it it'll be an interest free loan drawn up by a solicitor.
I don't want to get into "gifting" and buying a static. (even though capital gains is hardly applicable on a Park Home)
In all honesty I don't really care if she pisses the money up the wall, as long as she has a ball doing it. I just didn't want the money to go in care home fees if the worst should happen in a couple of yrs before she's had a chance to enjoy it.
PositronicRay said:
Thanks chaps
I don't want to get into "gifting" and buying a static. (even though capital gains is hardly applicable on a Park Home)
In all honesty I don't really care if she pisses the money up the wall, as long as she has a ball doing it. I just didn't want the money to go in care home fees if the worst should happen in a couple of yrs before she's had a chance to enjoy it.
I can't help on the question about how to arrange the loan but I think you should get a small pat on the back for your sentiment. I don't want to get into "gifting" and buying a static. (even though capital gains is hardly applicable on a Park Home)
In all honesty I don't really care if she pisses the money up the wall, as long as she has a ball doing it. I just didn't want the money to go in care home fees if the worst should happen in a couple of yrs before she's had a chance to enjoy it.
mjb1 said:
Very much doubt it - which bank is going to give a mortgage to an 85 year old!
Probably not many, but it's worth pointing out.If you are trying to game benefits, inheritance tax and a mortgage by playing "it's a gift (but not really)" then you need to be clear on what you are trying to achieve and what it might mean.
Gassing Station | Finance | Top of Page | What's New | My Stuff