Family loan tied in with inheritance

HelenFlowers
HelenFlowers Posts: 17 Forumite
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in Loans
I and my brothers co-inherit my parents house, which is on the market at present.
I am sole executor on the estate for convenience.
Meanwhile I have offered to lend my brother £25K to cover the costs of his own mortgage renewal, which gets paid back to me when we sell the house.
Any advice on the format of a letter between us to validate this?
I trust my brother completely, but obviously would like something written and watertight in case of the unforeseen.

All thanks marvellous people for help.
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Comments

  • Tom99
    Tom99 Posts: 5,371 Forumite
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    There are probably several options. One might be a deed of variation, that way you get 1st £25k from estate and split rest 50/50. Its not complicated, easy to draw up with a solicitor and less liable to any misunderstandings than with any sort of loan agreement you could drum up.
  • badmemory
    badmemory Posts: 7,787 Forumite
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    Tom99 wrote: »
    There are probably several options. One might be a deed of variation, that way you get 1st £25k from estate and split rest 50/50. Its not complicated, easy to draw up with a solicitor and less liable to any misunderstandings than with any sort of loan agreement you could drum up.

    wouldn't that only pay back £12.5k?
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    But half of that 25k is the OPs in any case.

    Wouldn't it be more suitable to split the pot in half, but then 25k is paid from the brother's share to the OPs share?

    To repay the 25k, you effectively need a difference of 50k, as with the original loan.
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    Deleted_User wrote: »
    But half of that 25k is the OPs in any case.

    Wouldn't it be more suitable to split the pot in half, but then 25k is paid from the brother's share to the OPs share?

    To repay the 25k, you effectively need a difference of 50k, as with the original loan.

    [FONT=Verdana, sans-serif]Yes my apologies you are correct, DOV says 1st £50k to OP being his own 1st £25k and brothers 1st 25K then rest split 50/50.[/FONT]
    [FONT=Verdana, sans-serif]Thank you for pointing out my mistake.[/FONT]
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
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    edited 9 November 2017 at 10:15AM
    Tom99 wrote: »
    [FONT=Verdana, sans-serif]Yes my apologies you are correct, DOV says 1st £50k to OP being his own 1st £25k and brothers 1st 25K then rest split 50/50.[/FONT]
    [FONT=Verdana, sans-serif]Thank you for pointing out my mistake.[/FONT]

    I think that you were right the first time. Is the objective not for the OP to receive £35000 more that his brother?

    If the estate was valued at £100000.
    OP gets £25000 PLUS half of £75000 which is £62500.
    Brother gets half of £75000 which is £37500.
    Difference is £25000.

    If OP gets £50000 plus half of the remainder (£50000) he ends up with £75000
    Brother gets £25000
    Difference is £50000.
  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    No. He needs to either receive 25k direct from the brother, or 50k from a shared pot. Either way gives the same result.
  • tjg04
    tjg04 Posts: 12 Forumite
    Step 1:
    OP Gives Brother £25k
    Balances are OP: -25k / Br: 25k

    Step 2:
    OP receives first 50k of 100k estate
    Balances are OP: 25k / Br: 25k

    Step 3:
    Even split of remaining 50k of estate
    Balances are OP:75 / Br:75k
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    tjg04 wrote: »
    Step 1:
    OP Gives Brother £25k
    Balances are OP: -25k / Br: 25k

    Step 2:
    OP receives first 50k of 100k estate
    Balances are OP: 25k / Br: 25k

    Step 3:
    Even split of remaining 50k of estate
    Balances are OP:75 / Br:75k

    [FONT=Verdana, sans-serif]Yes I agree with that. It was only when I put the same figures tjg04 has in a spreadsheet I realised my initial error. Minor correction, I think based on £100k value tjg04 step 3 should be OP £50K Br £50K.[/FONT]
  • HelenFlowers
    HelenFlowers Posts: 17 Forumite
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    Thank you everyone, both for the suggestion, and the maths. I have actually two brothers, only one is getting the loan, but I will work it out!
  • HelenFlowers
    HelenFlowers Posts: 17 Forumite
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    So just checking the legals, if I take this course and do a deed of variation:
    I would gift my brother £25K
    Then receive an extra £25K from my parents estate.

    Would there be any tax issues with the 'gift'?
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