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

Carrot007

zurpher said:

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. 

Depends on why they need the money. If they could get it elsewhere it could be ok (beyond them not paying it back of mental issues (on both sides), and IHT). If they can't they will probably slip further into debt anyway becuase they need to change, not recieve money. Defaulting etc is on the whole a good thing when in debt.

Brie

zurpher said:

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. 

Because if they weren't solicitors would starve.

y3sitsm3

zurpher said:

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. 

Because people make rules, and other people find a way around them so they make more rules that people find their way around etc.

If people weren't trying to find ways out of paying IHT, it'd be quite simple.

Chris_English

zurpher said:

@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. 

In my opinion it’s better all-round to make it a gift. If you think you’d like it back at some point then it’s easy for that to poison the relationship if they don’t feel the same, or even if they are just a bit slow, or if you see them heading off on a nice holiday while there’s still money outstanding.

It’s quite a lot of money to give, is it really going to fix whatever their issue is, rather than kick the can down the road, or end up being used for something else?

Grumpy_chap

y3sitsm3 said:

If people weren't trying to find ways out of paying IHT, it'd be quite simple.

There's no real indication in the thread that this loan / gift is driven by avoiding IHT, nor that that IHT / DoA are really considerations of note for the OP.

Sometimes, there is a tendency for forums to find potential problems when there are none.  IHT and DoA are not really major factors for smaller financial sums and an individual in the long "middle" of life.

y3sitsm3

Grumpy_chap said:

y3sitsm3 said:

If people weren't trying to find ways out of paying IHT, it'd be quite simple.

There's no real indication in the thread that this loan / gift is driven by avoiding IHT, nor that that IHT / DoA are really considerations of note for the OP.

Sometimes, there is a tendency for forums to find potential problems when there are none.  IHT and DoA are not really major factors for smaller financial sums and an individual in the long "middle" of life.

I never said the OP was trying to avoid IHT.

The OP asked why it has to be so difficult, and the answer is that it's difficult because people try to avoid paying IHT, so various rules have been put in place to prevent that.

MEM62

zurpher said:

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. 

It's not.  Gift them the money and do not expect it back if you are happy to do that.  This has nothing to do with the authorities or the tax man.  If you get anything back at a future date that will be a bonus.  .     

Chris_English

MEM62 said:

zurpher said:

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. 

It's not.  Gift them the money and do not expect it back if you are happy to do that.  This has nothing to do with the authorities or the tax man.  If you get anything back at a future date that will be a bonus.  .     

As others have explained above, that's not necessarily true. It could affect inheritance tax, or benefits.

bargainbetty

I may be paranoid to suggest this but I once loaned a small amount of money to a friend who was short for their credit card bill, and they spent the money on something else, leaving their card to accumulate fees. When asked why they didn't pay off the card, I was told that 'something came up'. 

If you are helping them clear debts, do it directly. Don't give them a chunk of cash and expect it to resolve. Sit with them and use your banking/debit card to settle the account and watch them close the account too, if possible. 

SusieT

I would make payment direct to the card or loan that is to be repaid (preferably after it has defaulted), so that you know the card or loan is cleared. If you can get the relative to close the accounts and they have defaults it is harder for them to be able to get into further debt. It would also be worth you sitting down with them first to make sure they have a budget that is reasonable and that they can live on and save a bit for emergencies without using cards or loans.