protecting my sister's money

cash_mad

Hi, all - I have a situation to ask about...here goes...

My sister & her partner of 30 years have sold a property & want to rent a flat while they look for another place to buy.
However, they have left the entire amount in one bank - a large one, but this is worrying me. I do know that their joint account in this bank is only protected up to £150,000.
There is quite a bit more in there, though.
When I pointed this out 'what happens if bank goes belly up?' the response was horror from my sister & lofty assurances from her partner that it wouldn't happen.
The atmosphere got tense, & whilst her partner is a sweetie, I think he's out of his depth here.
I suggested to my sister that she remove her 'half of the money' - leaving the protected amount in the bank, & she could 'loan' me the unprotected amount to spread around my accounts - as I sold a property a few years ago & did just this.
She & I are close, & trust is not an issue - I am giving her a witnessed letter & a repayment date.
I had suggested that she opens a couple of bank/building soc accounts herself, but they are in currently in a hotel until their rented flat can house them, in three weeks, so that would be difficult.
(Once in the rented flat, with proof of residence, she will open bank accounts with the returned 'loan' from me.)
Hence my bright idea to 'borrow' from her.
I know that my own estate would incur inheritance tax whilst guarding this money, but it would still be worth it as I cannot see her lose so much due to her partner's trusting stupidity.

Would this work ?

Please can anyone advise? Thank you.

Mojisola

cash_mad wrote: »

I suggested to my sister that she remove her 'half of the money' - leaving the protected amount in the bank, & she could 'loan' me the unprotected amount to spread around my accounts

She & I are close, & trust is not an issue - I am giving her a witnessed letter & a repayment date.

I know that my own estate would incur inheritance tax whilst guarding this money, but it would still be worth it as I cannot see her lose so much due to her partner's trusting stupidity.

If it's a properly documented loan, why would it be counted as part of your estate for inheritance tax?

missbiggles1

cash_mad wrote: »

Hi, all - I have a situation to ask about...here goes...

My sister & her partner of 30 years have sold a property & want to rent a flat while they look for another place to buy.
However, they have left the entire amount in one bank - a large one, but this is worrying me. I do know that their joint account in this bank is only protected up to £150,000.
There is quite a bit more in there, though.
When I pointed this out 'what happens if bank goes belly up?' the response was horror from my sister & lofty assurances from her partner that it wouldn't happen.
The atmosphere got tense, & whilst her partner is a sweetie, I think he's out of his depth here.
I suggested to my sister that she remove her 'half of the money' - leaving the protected amount in the bank, & she could 'loan' me the unprotected amount to spread around my accounts - as I sold a property a few years ago & did just this.
She & I are close, & trust is not an issue - I am giving her a witnessed letter & a repayment date.
I had suggested that she opens a couple of bank/building soc accounts herself, but they are in currently in a hotel until their rented flat can house them, in three weeks, so that would be difficult.
(Once in the rented flat, with proof of residence, she will open bank accounts with the returned 'loan' from me.)
Hence my bright idea to 'borrow' from her.
I know that my own estate would incur inheritance tax whilst guarding this money, but it would still be worth it as I cannot see her lose so much due to her partner's trusting stupidity.

Would this work ?

Please can anyone advise? Thank you.

You may mean well but how is this any of your business?

PasturesNew

I think you'd be seen as "interfering" too much. Better to find the details of a good/safe bank that's local to them - and get the necessary paperwork for them to open up a new joint account, then let them know you've done the research and here's the paperwork.

They're functioning adults. If you've alerted them to a potential issue and done the research and got the forms for them, you should leave it at that.

By the way .... there were similar issues 10 years ago when I sold and the limit was only £35k. It took me ages to open up loads of accounts all over the place and I've still got odd pots here and there as some accounts were hard to open and some I opened but never put money into .... it all got a bit out of hand That bank never went under.

I know some banks have gone under in the past - and do .... but you can't really "interfere" in somebody else's marriage over money, no matter how well intentioned you are.

Simply give them the tools to do the job, by locating the best bank, close to their house (accessible) and get the forms for them to fill in.

cash_mad

Thanks for your replies...Mojisola, only if I died before the repayment, then it would be counted into my estate...I think...if it isn't then she gets repaid as she should, & my estate would be separate, I hope.

missbiggles1, I know it looks like I should mind my own business - but she's my sister, & I am worried that she could lose her life savings (avoidably).

PasturesNew, good suggestions - I shall go down that road.

Thank you all again.

Mojisola

cash_mad wrote: »

Thanks for your replies...Mojisola, only if I died before the repayment, then it would be counted into my estate...I think...

No, it wouldn't. It would be debt which would have to be repaid before the total of your estate could be calculated for IHT.

If you had a mortgage of £500k, do you really think your estate would have to pay inheritance tax on that amount?

Malthusian

This is totally unnecessary. If the bank went tits up your sister would be fully compensated by the Financial Services Compensation Scheme unless she had more than £1 million in the bank.

*From 3 July 2015, the FSCS will provide a £1 million protection limit for temporary high balances held with your bank, building society or credit union if it fails. Read our Q&As about temporary high balances for more information.

What is classed as a temporary high balance?

Payments in connection with the following could be categorised as temporary high balances:
Sums paid to the depositor in respect of:

• Real estate transactions (property purchase, sale proceeds, equity release) relating to a depositor's main or only residence

Even before the "temporary high balance" law was introduced, the chance of the Government allowing someone's house purchase money to disappear in a bank collapse is virtually nil. Modern civilisation relies on people feeling their money is safe in the bank. Everyone who had savings in Northern Rock was compensated in full.

It might have saved a lot of time and worry for your sister if you'd checked your facts before trying to make your brother in law look stupid.

Biggles

I'm with the partner. I'd be furious if she handed over my money on the basis of a piece of paper which may - or may not - have any legal validity.

You've pointed out the possible pitfalls, now leave them to it.

seven-day-weekend

I would not want to 'lend' anyone my money, even my sister. I think that is far more risky than the bank going bust.

antrobus

cash_mad wrote: »

Thanks for your replies...Mojisola, only if I died before the repayment, then it would be counted into my estate...I think...if it isn't then she gets repaid as she should, & my estate would be separate, I hope.....

No it wouldn't, because the asset (the cash you had deposited on behalf of your sister) would equal the liability (the amount you owe your sister). Zero effect on IHT.

I think you might be right about some people being out of their depth.

bargainbetty

If the temporary high balance cover isn't going to be applied (and she can check this herself), then all they need to do is open their own accounts with unconnected banks and move some over.


There is absolutely no need or sensible reason to transfer any of the money to your name in any guise.