Loan large sum of money to relative

ElwoodP

Myself and my wife are considering loaning £30,000 to parents in law, to be repaid when they have sold their house which is currently on the market. Is this a simple thing to do? I'm concerned that one of the parties will get taxed on it at some point, how can I avoid this?

I'd also like to get a contract drawn up. Is there a standard contract I could find on the internet and edit or is it sensible to get a solicitor involved?

Any other advice on the practicalities would be appreciated (Apart from don't do it! We've considered the potential difficulties of lending money to relatives).

jonesMUFCforever

If it was me I would do 2 things

1 Don't do it and tell them to get the money from the bank

2 or if you really want to do it get a legal charge pot on the property for sale - you can get the forms from the Land registry website but to make sure it was 100% right I would employ a solicitor.

Shazza3383

I wouldn't lend can get tricky and awkward. If they own their own home and on the market they can borrow from a bank and make repayments over a year and have little interest to pay. This saves hassle and price of gettin a solicitor also any possible tax and any trouble that could come from lending to family. Past experience here I've still not received my money and its been 3 years and they still have the cheek to ask for more lol not saying ur situation would be the same.

Ben8282

Don't worry about the tax aspect. I can see no grounds for any of you to be taxed on the loan.
The most important point here is do you trust your parents-in-law?
Does their reason for needing this money from you at this time make complete sense? Are there other alternatives that you would think are better but your parents-in-law insist are no good or will not work.?
I don't really believe that there is any sort of contract that you could use. It really is a matter of trust.

Mr.Generous

only lend it to them if you are happy NOT getting it all back.

curty510

only lend friends and family what you can afford to lose, so many threads on here asking the question once its all gone wrong.

That said, i would of lent my in-laws anything, as they were decent people and trustworthy.

DigForVictory

Had we had 30K, we'd have given it to my in-laws to get them into a place of their own. The old man was a steaming demon against any kind of debt, right up to and including mortgages so they lived rented. I respected his principles, but we could never get enough money together to get them onto the property ladder.

If you can afford the 30K, give it to them.

ElwoodP

I appreciate the advice guys but as stated in my original post I'm really just looking for advice on how to do it, not whether it should be done. I'm not going to go into why the loan is necessary but in our opinion it is, I completely trust my parents in law and we are prepared to lose the money. Frankly I'd even consider giving it to them if that's what was required, they are salt of the earth amazing people.

I was considering a contract not because I don't trust them but because I think its important to write down expectations so there is no misunderstanding further down the line.

As I say I'm really just looking for advice on best practices of how to loan money.

Pixie5740

You can draft your own agreement which can be as detailed as you like. As a minimum it should contain the names of the lenders, the borrowers, the date, the amount being loaned, interest (if applicable) and how/when the loan should be repaid i.e. in a lump sum on the sale of 12 Pigeon Street (or whatever the address is of the property they're selling). The document should be signed and dated by both parties.

If you're not confident about drafting something yourself there are plenty of examples of documents available online or for the kind of money you're talking about it might be worth paying a solicitor a few hundred quid to draft something if you're not confident about doing it yourself.

foxy-stoat

ElwoodP wrote: »

I appreciate the advice guys but as stated in my original post I'm really just looking for advice on how to do it, not whether it should be done. I'm not going to go into why the loan is necessary but in our opinion it is, I completely trust my parents in law and we are prepared to lose the money. Frankly I'd even consider giving it to them if that's what was required, they are salt of the earth amazing people.

I was considering a contract not because I don't trust them but because I think its important to write down expectations so there is no misunderstanding further down the line.

As I say I'm really just looking for advice on best practices of how to loan money.

Draft up something yourself, your name address, their name(s) address, amount you are loaning them, their account number and sort code where you will pay it, repayment terms including your account details, and have it witnessed by someone independent. Each person gets a copy.

Tax is not really an issue - not sure why you would think a loan is taxble.

You only really need to use this if both die before you get your money back as its too much for a small claims track to recover if they dont pay you back and it will propbably cost you 4 figures to take them to court and recover your money should they not pay you back.

Good luck with it.

Transfer the money to their account though, no cash - that way theres a trail.

enthusiasticsaver

If they do not pay it back what will you do? If you get a contract drawn up are you prepared to enforce it in court?

As you have said you are prepared to lose it and trust them implicitly. If that is so why do you need a contract? If you think they may forget later on down the line then I guess just a standard one off the internet or a promissory note or letter is a way of getting it unofficially. What have they suggested or have you broached the idea of a signed contract to them?