Inheritance, loans to children and other confusion

Juleszoemay

Thanks SeniorSam, 

I agree, with everything you’ve said, I only found out about this recently and I’m so upset that my brother thinks that it’s fair, or wants me to believe that it is. 

He is my only brother and I already feel differently about him, I can’t bear feeling this way. I haven’t told my husband yet because once I’ve said it that’s it, and he will be of the same opinion as me that this is calculated in my brothers favour massively. 

I’ve tried to raise it and I think my dad understands but doesn’t know how to make it right. Because the investment property was bought 12 years ago. So the same property now would cost almost twice as much but yield the same return as the one bought in 2010. Plus my parents don’t have a load of cash anymore. 

I just feel sick whenever I think about it. 

Sea_Shell

Firstly it's good that you've realised what a mess this could (and probably will) end up in.  On the face of what you've written, you are likely to get the 💩 end of the stick.

Especially if brother gets other house, and both your loans are "written off" or changed to "gifts".

Now solving it is going to bring it's own problems and be a double edged sword, especially if things are put in writing and made "official" along with appointing a solicitor as executor.

As a family you need to all decide/agree what are "loans" and what are "gifts" and get that in writing.

If loans, then any outstanding amounts, on death (whose?), would be repayable to their estate and subject to IHT (AIUI).

Also are they taxpayers, and are they paying income tax on the interest you're paying back?  ~£1500pa?

There are so many pitfalls here.

pickledonionspaceraider

Just an idea - Perhaps your parents have deliberately done it like this, as they think your brother needs more help in life

I am not saying it is fair or otherwise, and could actually feel like a punishment for success on your part, but maybe they want to see you siblings on a level pegging in terms of finances (wherever it has come from, ie personal gains or parental help).  Your parents  must be fully aware of the situation and the fact that your brother will never end up paying back that loan. Unless they were conned, they didn't accidentally give this money or house over, it was deliberate. 

It is a shame that it is already affecting relationships and making feelings change. 

What a pickle. I don't know the answers.

Oftentimes in these situations I see people reacting angrily as they equate extra gifts as the other sibling being loved more, and not really about the money

Sea_Shell

pickledonionspaceraider said:

Just an idea - Perhaps your parents have deliberately done it like this, as they think your brother needs more help in life

I am not saying it is fair or otherwise, and could actually feel like a punishment for success on your part, but maybe they want to see you siblings on a level pegging in terms of finances (wherever it has come from, ie personal gains or parental help).  Your parents  must be fully aware of the situation and the fact that your brother will never end up paying back that loan. Unless they were conned, they didn't accidentally give this money or house over, it was deliberate. 

It is a shame that it is already affecting relationships and making feelings change. 

What a pickle. I don't know the answers.

Oftentimes in these situations I see people reacting angrily as they equate extra gifts as the other sibling being loved more, and not really about the money

Hmmm.  From what the OP has written, brother is an accountant and the extra property was a BTL, so not "needed" by the brother.

OP, what was his £400,000 "loan" for?   His own home?   Business venture?


TBH, it sounds like the parents were "mislead" if not conned, by the "financially savvy" son.


Just my take on it, from what's been written.

Keep_pedalling

Juleszoemay said:

I think they aren’t mentioned because of IHT liability. At the moment all the lending was given over 7 years ago so whilst I’m paying mine back with a paper trail, my brother is not. It seems he’s more savvy than I. 

So we are talking potential tax fraud, your parents really need to get this sorted.

Juleszoemay

Sea_Shell said:

pickledonionspaceraider said:

Just an idea - Perhaps your parents have deliberately done it like this, as they think your brother needs more help in life

I am not saying it is fair or otherwise, and could actually feel like a punishment for success on your part, but maybe they want to see you siblings on a level pegging in terms of finances (wherever it has come from, ie personal gains or parental help).  Your parents  must be fully aware of the situation and the fact that your brother will never end up paying back that loan. Unless they were conned, they didn't accidentally give this money or house over, it was deliberate. 

It is a shame that it is already affecting relationships and making feelings change. 

What a pickle. I don't know the answers.

Oftentimes in these situations I see people reacting angrily as they equate extra gifts as the other sibling being loved more, and not really about the money

Hmmm.  From what the OP has written, brother is an accountant and the extra property was a BTL, so not "needed" by the brother.

OP, what was his £400,000 "loan" for?   His own home?   Business venture?


TBH, it sounds like the parents were "mislead" if not conned, by the "financially savvy" son.


Just my take on it, from what's been written.

The other £400k was to buy his home. His argument to me was that the BTL was to get him on the property ladder, yet that was kept when he bought his actual home, which btw my dad paid for fully, my brother didn’t actually contribute at all! Maybe paid SD and solicitors, possibly. I did respond that it was nothing to do with getting on a ladder, a ladder means you move from step to step, but because he’s managed to borrow again and our dad could just about afford it, he didn’t need to sell the BTL, and in fact I would have at that point questioned that if they had sold it back then, given that I believed it was my parents investment, not my brothers. 

I think my parents have been mislead too. But my brother always seems to come out of any situation on top. 

I don’t think my parents think he needs any more ‘help’ than me. He just finds it easier to manipulate our parents to his gain. 

Our understanding of the unofficial landings were also very different, in 2014 I had a 2nd child and wanted to work part time, so we downsized our house and paid my parents back £80k because I believed the debt needed to be repaid. 

My brother has recently had a 2nd child and he’s all but stopped paying dad for the time being, and is moving to a more expensive house 😳 

Juleszoemay

Sea shell, 

I don’t think they pay income tax? They are in their mid 70’s and draw pensions, they don’t have any other income other than pensions. 

I think the lending needs to be re categorised as gifts and remove the interest calculator, my brothers will never be repaid, whether it has interest or not, mine could be. But either way what’s the point? 

I assume if it was gifted back in 2012 then it’s irrelevant now in terms of IHT? And could I still provide a monthly payment to my parents by way of assisting with their income needs for example without it being assumed to be any form of repayment. Just an allowance? 

Sea_Shell

If it were me, I'd stop making repayments NOW, and I'd also be very cautious about helping them financially in the future...they can ask their son for help!!!

If they've left themselves short...how is that now your problem!?!

It sounds like you've acted honourably and in good faith, but your brother is taking you all for mugs!

As for being taxpayers, if their pensions personally exceed £12570 a year, then yes, they will be taxpayers.

AIUI, if they document that the "loans" were in fact "gifts" then I understand that they would fall outside IHT, as you'd have proof that the funds arrived on X date.

It needs to be decided which they are, and a line drawn, literally.  Not this halfway house of sort of gift/loan depending on which way the wind is blowing.

Good luck.

Keep_pedalling

Juleszoemay said:

Sea shell, 

I don’t think they pay income tax? They are in their mid 70’s and draw pensions, they don’t have any other income other than pensions. 

I think the lending needs to be re categorised as gifts and remove the interest calculator, my brothers will never be repaid, whether it has interest or not, mine could be. But either way what’s the point? 

I assume if it was gifted back in 2012 then it’s irrelevant now in terms of IHT? And could I still provide a monthly payment to my parents by way of assisting with their income needs for example without it being assumed to be any form of repayment. Just an allowance? 

Pensioners still pay tax if their total income is high enough. I’d does sound like your brother is treating his loans as gifts but you are treating them as they were attended. Bank of mum and dad loans often end up not being paid back especially when the parents are happy to let things drift.

Your assumption is wrong, if the loans are written off now the 7 year clock starts now. Your parents really should see a solicitor regarding their wills.

Sea_Shell

Keep_pedalling said:

Juleszoemay said:

Sea shell, 

I don’t think they pay income tax? They are in their mid 70’s and draw pensions, they don’t have any other income other than pensions. 

I think the lending needs to be re categorised as gifts and remove the interest calculator, my brothers will never be repaid, whether it has interest or not, mine could be. But either way what’s the point? 

I assume if it was gifted back in 2012 then it’s irrelevant now in terms of IHT? And could I still provide a monthly payment to my parents by way of assisting with their income needs for example without it being assumed to be any form of repayment. Just an allowance? 

Pensioners still pay tax if their total income is high enough. I’d does sound like your brother is treating his loans as gifts but you are treating them as they were attended. Bank of mum and dad loans often end up not being paid back especially when the parents are happy to let things drift.

Your assumption is wrong, if the loans are written off now the 7 year clock starts now. Your parents really should see a solicitor regarding their wills.

I didn't realise that!!   Even if they could prove when the funds were received?

With nothing in writing either way, what's to stop them verbally confirming they were gifts.   I'm sure many people don't keep all the records they should of these things.