Implications of loan to a parent

stuyvpc

Hi everyone,

My wife and I are considering a loan to her parents (both 80 years old) - enough for both of them to do a round the world cruise. It is something they want to do for years but have never had the money available. We haven't yet mentioned it to them we are considering this in case it becomes too bureaucratic, but we are probably talking about an amount around 25K.

A couple of years ago I received an inheritance when my mother passed away so we have the finances available to help them. My wife has 2 siblings and I am sure they will be very supportive of this idea but cannot help financially.

What concerns me is how this will be dealt with at some future time with regard to either care home costs or inheritance. My in-laws estate will be nowhere near the IHT limit and they have always made it clear the estate will be equally shared between my wife and her 2 brothers.

Do we need an official document drawn up by a solicitor to cover ourselves regarding sale of the house for care home costs/estate duties? I imagine the deal would be that we get repaid when their house gets sold, but we do need to cover our behinds properly as perusal of these boards has shown things can go spectacularly wrong!

To make life easier this would be an interest free loan.

Thanks very much for any advice.

dealer_wins

I would say treat them if you can afford it.

https://www.youtube.com/watch?v=ELFeaD6h9LY

Mojisola

stuyvpc wrote: »

Do we need an official document drawn up by a solicitor to cover ourselves regarding sale of the house for care home costs/estate duties? I imagine the deal would be that we get repaid when their house gets sold, but we do need to cover our behinds properly as perusal of these boards has shown things can go spectacularly wrong!

Definitely!

If the house is sold because of residential care, the loan will be repaid then.

If it's not sold until after the second death, the executors will need a written document to prove the debt is owed from the estate.

In case one parent dies and the other wants/needs to downsize, have a clause about whether the debt is repaid at that point or when the new property is sold.

Pixie5740

You could have a charge put against their property.

[Deleted User]

There is one golden rule in life...NEVER lend money to family under any conditions unless you are prepared to kiss goodbye to your money !
If the have got to 80 without a world cruise then they won't miss it will they?

ViolaLass

venison wrote: »

If the have got to 80 without a world cruise then they won't miss it will they?

Indeed, might as well shoot them now since there's clearly no joy to be had once you're beyond your three score and ten.

forgotmyname

As long as your willing to say the money was a gift when it all goes pear shaped and the other family members decide they were not of sound minds to take on a loan or that they told them you bought the cruise as a gift.

They can drag it out for years with costs.

I thought i had read som terrible things on the net and shocked when my wifes brother decided that the money left to him was not enough and he opened mail order shopping accounts in their dads name. This was after he passed away.

Another distant relative found out his sister had been caring for their mum and dipping into her savings in a big way. Similar thing happened to my dads new partner. Her sister wiped out their mums savings.

Nothing like a bit of money to show some peoples true colours.

Are you prepared to gift it of have to fight a long battle to hopefully get it back?

ReadingTim

stuyvpc wrote: »

A couple of years ago I received an inheritance when my mother passed away so we have the finances available to help them. My wife has 2 siblings and I am sure they will be very supportive of this idea but cannot help financially.

Thing is, you are asking your wife's sisters to help financially, as you're reducing their inheritance. Assume the estate's worth £270k. Split 3 ways that's £90k each. Factor in the repayment of the loan (£25k) and the estate's now only worth £245k (£270k-£25k). Split 3 ways and that's only £81.6k each.

So you "generosity" has cost your sisters in law over £8k each. Not sure how supportive I'd be of that idea.

I suggest you either be willing to gift them the sum with no expectation of payment, or let them sort out raising the money themselves - equity release etc

Mojisola

ReadingTim wrote: »

Thing is, you are asking your wife's sisters to help financially, as you're reducing their inheritance. Assume the estate's worth £270k. Split 3 ways that's £90k each. Factor in the repayment of the loan (£25k) and the estate's now only worth £245k (£270k-£25k). Split 3 ways and that's only £81.6k each.

So you "generosity" has cost your sisters in law over £8k each. Not sure how supportive I'd be of that idea.

I suggest you either be willing to gift them the sum with no expectation of payment, or let them sort out raising the money themselves - equity release etc

If the parents go for equity release, it will reduce whatever inheritance is left far more than a loan from a relative!

undaunted

25k is a lot of money to gift. Assuming they actually want to go on this cruise enough to borrow such a sum it seems perfectly generous and reasonable for you to loan and then later be repaid the sum to me.


The parents not you are choosing to spend their money on what they want to do - all be it by way of loan to fund it - as is their right. You take nothing from the siblings, who have no automatic entitlement to this money despite some of the nonsense above.


If you're going to loan the money a loan agreement - either drawn up by a solicitor or at the very least downloaded on the web would be a wise precaution in my opinion. Should they later need to sell their home to pay for care what reason is there to believe social services / anyone would accept this debt was owed without previous paperwork to support the claim?

stuyvpc

ReadingTim wrote: »

So you "generosity" has cost your sisters in law over £8k each. Not sure how supportive I'd be of that idea.

Depends how you feel about your parents. My wife's siblings are very supportive of the the idea as they would like their parents to do something they have always wanted while they still can. They cannot help financially at this time but as Mojisola pointed out any commercial arrangement would cost a lot more than an interest free loan from a family member.