Lending Mum money rather than equity release?

moneymark

Hello,

Things are starting to get a bit tight for my Mum who is 83.

She has her own small bungalow she owns outright and is considering equity release.

I'm in a position to be able to lend her money (interest free) rather than going down the equity release route.

Can anyone advise on the best way to go about this? Should I have a legal agreement drawn up or something written into the will?

What happens when the time comes my Brother and I inherit her estate with regards to inheritance tax etc? (My Brother totally accepts I need to be paid the loan in full)

Is there a good way of going about this? Is it better to set up a trust perhaps?

Any advice welcome.

Thanks in advance.

[purplesignup][/purplesignup]

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Skibunny40

I'm no expert, but you'll need both a legal agreement ( in case your mum needs to go into care and sell the house to pay for it) and an amendment to her will - think it can be classed as a debt which needs to be repaid before anything else.

onwards&upwards

Why are you opposed to equity release?

Keep_pedalling

As long as you can afford it and are not going to need it while your mother still needs her home then this is might be a better option than ER, but you should secure your loan against the property by placing a charge against it.

You do have to balance the compound interest that would be applied against an ER loan against any losses you would see on your loan due to inflation and the the growth you could earn on investing the money.

Pollycat

Why are things starting to get a bit tight for your Mum?
Does she need a lump sum for something specific e.g. a new roof or is she just struggling with general bills?
Could she be entitled to any benefits that would help her budget? Might be worth looking into that.


Re your 'inheritance' - if your Mum needs to go into care at some point in the future, there might not be much left.


Make sure that any money you do decide to lend to her is fully protected.

mattpaint

Could you buy a share of the house?

paddy's_mum

Wills can be changed without anyone's (in this case, yours) knowledge or consent and frequently are, as many people have found to their cost.

Good, supportive legal advice to prevent any shenanigans or upsets further down the line - forgetful Ma, hostile brother, local authority demands etc.

Good luck but how nice to hear of a family wanting to give to Mum, not take.

Voyager2002

Adjusting the will would mean that any extra money she left you would be seen as a gift and so subject to inheritance tax, rather than repaying a debt (not taxable).

mikeeboy

Lending it? How is she going to pay it back?

Mojisola

moneymark wrote: »

She has her own small bungalow she owns outright

mikeeboy wrote: »

Lending it? How is she going to pay it back?

Presumably when the house is eventually sold.

moneymark

Thanks for all your advice.