Do I need to document family repayments?

TickyRa

Three years ago my elderly father lent me £50k (interest free) towards the purchase of my first home. To appease the mortgage lender this was declared as a gift and a letter was supplied confirming that the money does not need to be repaid. However in reality (in addition to my actual mortgage repayments) I am also making monthly repayments to my father - of which I have now repaid approximately £10k.

My father is elderly (86 next month) and due to age and declining health we want to get his affairs in good order. Because this has been a purely verbal agreement I wonder if this will create problems later on.

My questions are:

Should we have some written documentation regarding the loan?

At present are my monthly bank transfers are sufficient documentation to show that I am reducing the lump sum ‘given me’?

Are there implications re. inheritance tax (his estate is worth over the £325k marker) in this situation?

Thanks for reading. Advice appreciated!

eddddy

TickyRa wrote: »

To appease the mortgage lender this was declared as a gift and a letter was supplied confirming that the money does not need to be repaid.
...
Should we have some written documentation regarding the loan?

If you get a document confirming it is really a loan and not a gift, you would be putting in writing that you committed mortgage fraud.

But there is nothing to stop you gifting £10k or £50k to your father, if you want.



However, you say you've given your father £10k. If he leaves his estate to you - you will eventually get £6k and £4k will go in inheritance tax.

You would have been better off just keeping the £10k.

Similarly you would be better off by confirming that the £50k was a gift and not a loan. (Otherwise there will be more inheritance tax to pay.)

Guest101

eddddy wrote: »

If you get a document confirming it is really a loan and not a gift, you would be putting in writing that you committed mortgage fraud.

But there is nothing to stop you gifting £10k or £50k to your father, if you want.



However, you say you've given your father £10k. If he leaves his estate to you - you will eventually get £6k and £4k will go in inheritance tax.

You would have been better off just keeping the £10k.

Similarly you would be better off by confirming that the £50k was a gift and not a loan. (Otherwise there will be more inheritance tax to pay.)

There may be anyway, as it's within 7 years of the 'gift'

KRB2725

Does your Dad need the money back - does he use the money as the majority of his estate is tied up in his property or does he save it?

Do you have any siblings?

TickyRa

Thanks folks for the replies and your advice.

In reply to emmaatthews - my Dad has savings (an ISA I think) and whatever I pay him back he uses as pocket money it seems. I have one brother!

agrinnall

Are your bank transfers to your father from the same bank that you have your mortgage with? If so you might want to consider using a different bank, as if they find out that the gift was in fact a loan they could ask you some awkward questions.

On the IHT issue, is your mother already deceased and did she leave her estate to your father? If so then his allowance is actually £650K.

TickyRa

Thanks agrinnall - good point re. the bank and one I will address.

theartfullodger

TickyRa wrote: »

Three years ago my elderly father lent me £50k (interest free) towards the purchase of my first home. To appease the mortgage lender this was declared as a gift and a letter was supplied confirming that the money does not need to be repaid. However in reality (in addition to my actual mortgage repayments) I am also making monthly repayments to my father - of which I have now repaid approximately £10k. ........

Hmmnnnn fraud by false representation or by failing to disclose information?
http://www.legislation.gov.uk/ukpga/2006/35/crossheading/fraud

2 Fraud by false representation

(1)A person is in breach of this section if he—
(a)dishonestly makes a false representation, and
(b)intends, by making the representation—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.

(2)A representation is false if—
(a)it is untrue or misleading, and
(b)the person making it knows that it is, or might be, untrue or misleading.

(3)“Representation” means any representation as to fact or law, including a representation as to the state of mind of—
(a)the person making the representation, or
(b)any other person.

(4)A representation may be express or implied.

(5)For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).

3 Fraud by failing to disclose information

A person is in breach of this section if he—
(a)dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and
(b)intends, by failing to disclose the information—
(i)to make a gain for himself or another, or
(ii)to cause loss to another or to expose another to a risk of loss.

I'm no lawyer so I don't know if it's fraud: What do other members think? It's a criminal offence of course...

davidmcn

theartfullodger wrote: »

Hmmnnnn fraud by false representation or by failing to disclose information?
http://www.legislation.gov.uk/ukpga/2006/35/crossheading/fraud


I'm no lawyer so I don't know if it's fraud: What do other members think? It's a criminal offence of course...

Possibly fraud, but so what? It can't be undone now.

HappyMJ

davidmcn wrote: »

Possibly fraud, but so what? It can't be undone now.

Yes it can. The mortgage can be called in and repayment demanded in full immediately plus costs.

A CIFAS marker would be put against the OP's name preventing them from ever having a mortgage again or ever being able to rent a property. It's quite serious. The banks have an interest they are trying to protect. Undermining that by giving false information to obtain a mortgage is fraud. It is an offence that can lead to a prison sentence albeit usually suspended.

The OP has to ensure it's always considered a gift. If the OP wishes to hand money back in gratitude for having given the gift previously then that's up to the OP. The "debt" will be extinguished when the father dies. The estate cannot ask for the gift back.

davidmcn

HappyMJ wrote: »

Yes it can.

No it can't. The fraud was committed at the point the OP declared the funds to be a gift, knowing it was actually a loan. They might be able to try to cover it up, or mitigate the effects, but from a criminal law point of view they've already committed the offence.