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What are the implications of giving 6k to an indebted family member?

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zurpher
zurpher Posts: 103 Forumite
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Is it best to do this as a gift or an interest-free loan repayable on demand. Any tax implications I need to be aware of? Any form required to document this for the authorities. 

Thanks for your help. 
«13

Comments

  • The main implication is that you will be £6,000 poorer after you give it to them.

    If you die within seven years of the gift then there may be inheritance tax implications, but there is no tax to be paid on giving or receiving a gift.

    Your question of whether you should make it a gift or a loan depends on whether you want to give them the money, or lend it to them.
  • zurpher
    zurpher Posts: 103 Forumite
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    @Chris_English Thank you for your plain English.  ;) I don't understand the inheritance tax implications. I'll do my best not to die soon but what if ... ?  :# 
  • Grumpy_chap
    Grumpy_chap Posts: 18,295 Forumite
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    Your question of whether you should make it a gift or a loan depends on whether you want to give them the money, or lend it to them.
    Don't expect it to be paid back, whether you say it is a loan or a gift.  If you say it is a loan, and it does get repaid, happy days.
  • zurpher
    zurpher Posts: 103 Forumite
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    @Grumpy_chap I know that there is a high chance I will never see it again. I'll cope. It's family, you know. So it is worth for me to help clearing that debt a little bit. 
  • Carrot007
    Carrot007 Posts: 4,534 Forumite
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    Your question of whether you should make it a gift or a loan depends on whether you want to give them the money, or lend it to them.

    And or courser ifwant to fall out with them when they fail to pay it as will likely occur.

    OP, a loan would probably put them in a worse position.

  • Penguin_
    Penguin_ Posts: 1,587 Forumite
    Fifth Anniversary 1,000 Posts Name Dropper
    I guess the other thing to consider is do they know why they ended up in debt & have they got measures in place to ensure they won't just get back into debt?
  • zurpher
    zurpher Posts: 103 Forumite
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    Carrot007 said:

    OP, a loan would probably put them in a worse position.

    You mean mentally or are there other external consequences – besides potential inheritance tax? An interest-free loan seems much better than serving interests to a professional lender. 
  • Brie
    Brie Posts: 14,772 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Unlikely to be an issue if it's only £6k but potentially deprivation of assets if you suddenly have care needs.  Less likely to be of note if you stay healthy and mobile a couple of decades. (obviously preferable)
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  • y3sitsm3
    y3sitsm3 Posts: 399 Forumite
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    zurpher said:
    @Chris_English Thank you for your plain English.  ;) I don't understand the inheritance tax implications. I'll do my best not to die soon but what if ... ?  :# 
    If it's a gift and you die within 7 years of giving it then it'll be treated as an inheritance, so if your estate is big enough that inheritance tax is payable, they'll have to pay inheritance tax on it.

    The same is potentially true for loans, you'd probably want to speak to a solicitor to ensure that it isn't treated as a "transfer of value."
  • zurpher
    zurpher Posts: 103 Forumite
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    y3sitsm3 said:

    The same is potentially true for loans, you'd probably want to speak to a solicitor to ensure that it isn't treated as a "transfer of value."
    Why do such things always have to be so complicated.  :/
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