Loaning some savings to family members

Leedslad8t6

Hello All,

I am in need of some advise as google doesn't seem to have the answer to my specific situation.

I have recently closed an ISA to take advantage of the tax free savings on some of the current accounts combined with a help to buy isa.

I have some money left over and family members (mother and step father) who's home needs some basic maintenance (roof repairing, hall stairway carpets and decorator)

Am I legally sound to lend them each a lump sum (10k each for example) which they can then use in their own accounts to create interest that they then use on the house (I receive nothing from them).

I understand the risk on my part being they could potentially just up and off with my money but want to make sure that I stay on the right side of the law.

It is my understanding that as long as I do not benefit from any interest gained I have no tax/laws to worry about.


Many thank's

Daniel

Gadfium

Once you give the money to them, then it belongs to them.

Leedslad8t6

Thank's for the reply.

I assumed that, and i'm aware that it becomes part of their "estate" if paid back in a lump sum over 3k a year I think I read.

They have no debts apart from a mortgage though and that's not even worth 100k so IHT isn't an issue.

My Mother is 47 and step Dad 39 so I will take the risk that neither of them are about to suddenly kick the bucket xD.


D

Linton

There is no problem with you lending or giving your parents some money. The legal or tax issues for you would arise if you then claimed benefits because you were poor, having disposed of all your money. Similarly if you were using the gift to avoid inheritance tax. But it seems pretty clear that neither apply here. Having interest from £10K, or even just haviong the £10K could of course affect their benefits and/or tax.

Why go for all the rigmarole of lending them £10K to put in a bank account to gain a relatively small amount of interest. Wouldnt it be much easier just to give them say £500? I suggest that at least in your own mind you write off whatever you give them. Look on other forums and you will find families split apart by money matters such as loans not being repaid.

If you do pass them £10K as a loan for interest you may have a problem if they died as the money would well be considered to be part of their estate unless you had a document specifying that it was a loan.

Gadfium

As far as I know, as long as you are not in a position where you would be putting yourself in a position of deprivation of assets (example- you are about to apply for means tested benefits), then it is a gift.

Money is an excellent way to fall out with family, so you might want to consider getting an agreement drafted on paper?

it might be easier just to pay for the improvements? £20K will generate something between £600 and £1K per annum before any taxes, so they will be waiting a while if the home improvements go beyond a bit of wallpaper and a lick of paint.

Leedslad8t6

I did think of the tax implications, both earn well under 20k per year and claim zero benefits.

I read a person has to have 16k of savings before they have a benefit tapered, also that you are entitled to 6 months jobseekers regardless of savings whilst you look for work. (if they ever lost their job)

I do realise it could be easier to just give them the money and I hadn't ruled that out entirely.

Thank's for the info.

D

atush

It seems to me it would be best to jsut lend them the cash they need. that they can pay back (or not) in future.

If you gave it to them, it will delay you buying a house, plus the larger problem of divorce. In which case your stepfather could leave your mom, taking our cash with him. While that may not be likely, it is also possible she could die, leaving him the 20K which he could use to set up life with wife no2.

So really, it would be best just to lend them what they need to get the work done, and set up a payment plan to get the cash back to you.

Leedslad8t6

Thank's for the input,

Not that it would change much but they are not married & I don't plan on buying a property within the next year or two xD.

I'm leaning towards just lending them the cash though having read all the posts.

D

Dan83

Just because it's your mum and step dad, it doesn't mean they won't rip you off.

On the other hand I've borrowed a large amount to my uncle about 10 years ago, I set up a bank account and give him the paying in book, 12 months later he hadn't missed a payment, job done, he over paid me by £500 and it was more hassle giving the money back then getting money from him.

People always say don't lend money to family, but for every bad story there will be 10 good stories.

Just brace yourself for the bad, aswell as good.

Eco_Miser

Gadfium wrote: »

Once you give the money to them, then it belongs to them.

If it is a documented loan, then they owe you a debt equal to the money you lent.

kidmugsy

Eco_Miser wrote: »

If it is a documented loan, then they owe you a debt equal to the money you lent.

Exactly. Document it: you write them letters saying how much you've lent them and the terms of repayment. They sign that they agree to the terms and have received the money. Get the signatures witnessed too, if it really is going to be sums as large as £10k. Then everyone stores copies.

We've done it this way without, so far, any problems. Like much of life, it's a gamble.

If the sum they need is only a few hundred each, that's how much I recommend you lend them. Find some other efficient use of the rest of the surplus capital. That way you have more chance of all staying on good terms with each other.