Inheritance, loans to children and other confusion

Juleszoemay

GrumpyDil said:

If they own your grandparents house what is happening with that one? Is it let or do you mean they own it but your grandparents live there? 

It’s in my mums name. They died 15 years ago. It’s not rented out, mum just uses it as a holiday home really. 

Sea_Shell

Juleszoemay said:

GrumpyDil said:

If they own your grandparents house what is happening with that one? Is it let or do you mean they own it but your grandparents live there? 

It’s in my mums name. They died 15 years ago. It’s not rented out, mum just uses it as a holiday home really. 

Maybe your mum could gift that to you to "balance the books" as it were. 😉

Keep_pedalling

Juleszoemay said:

Keep_pedalling said:

Sea_Shell said:

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.

It does not matter when the money was transferred, the fact that interest has been paid makes it a loan. This already sounds a financial mess of your parents creation, I would advise against compounding it with committing tax fraud. 

Do you mean the fact I’ve been making payments? Rather than interest, as there is nothing documented to suggest I’m paying interest. But I am making payments to them. I will cease doing so. 

oh my god this is a nightmare. 

Whether it was an interest free loan or not it is still a loan as is your brother’s £400k which he has payed ad hoc repayments on. 

Keep_pedalling

Juleszoemay said:

RAS said:

You could end up with a situation where your loan is a debt to the estate, and the distribution means that your brother gets half the money you repay. And his "loans" are classed as gifts, or not depending on whether the executor realises he's been re-paying at intervals.

Do your parents have wills? Even if they have, they need to talk to someone about inheritance planning as this needs sorting.

Do explain before you stop paying why you are doing so.

Hi RAS, 
The fact he is repaying it adhoc not through banking has risen alarm bells to me. And why hasn’t anyone suggested I should be doing the same? It makes no sense. Particularly as I live 5 miles from my parents and he’s 100 miles away. 

It all smells very fishy to me, and I think my brother will shaft me. He clearly has limited morals given what he’s manufactured with regard to the BTL property. On that, I have seen on land registry that he has recently added his wife to the title, and raised the value to £200k any idea why he would do that? Surely it’s not that simple to change the value of a house by adding a spouse and increasing it? Wouldn’t you have to pay SD or something? Sorry if you don’t know, I just thought someone might? 

Thanks 

Adding his wife to the title makes sense if he is a higher rate tax payer and she isn’t. It also makes sense for CGT purposes as they will be able to use 2 x allowances instead of one.

I have said it before but I will repeat myself in that your parents need professional advice.

Sea_Shell

Keep_pedalling said:

Juleszoemay said:

RAS said:

You could end up with a situation where your loan is a debt to the estate, and the distribution means that your brother gets half the money you repay. And his "loans" are classed as gifts, or not depending on whether the executor realises he's been re-paying at intervals.

Do your parents have wills? Even if they have, they need to talk to someone about inheritance planning as this needs sorting.

Do explain before you stop paying why you are doing so.

Hi RAS, 
The fact he is repaying it adhoc not through banking has risen alarm bells to me. And why hasn’t anyone suggested I should be doing the same? It makes no sense. Particularly as I live 5 miles from my parents and he’s 100 miles away. 

It all smells very fishy to me, and I think my brother will shaft me. He clearly has limited morals given what he’s manufactured with regard to the BTL property. On that, I have seen on land registry that he has recently added his wife to the title, and raised the value to £200k any idea why he would do that? Surely it’s not that simple to change the value of a house by adding a spouse and increasing it? Wouldn’t you have to pay SD or something? Sorry if you don’t know, I just thought someone might? 

Thanks 

Adding his wife to the title makes sense if he is a higher rate tax payer and she isn’t. It also makes sense for CGT purposes as they will be able to use 2 x allowances instead of one.

I have said it before but I will repeat myself in that your parents need professional advice.

More specifically INDEPENDENT professional advice!!!

It sounds to me like they've been treating their son AS the professional, and have been taking his advice (manipulations?) as gospel.

Would they now feel like they were somehow betraying their son if they were to seek independent advice?  Would he lay a guilt trip on them?

I can almost hear the son now..."ah so you don't trust me...cheers dad!!"

Strange things, families!! 😉

Juleszoemay

Sea_Shell said:

Juleszoemay said:

GrumpyDil said:

If they own your grandparents house what is happening with that one? Is it let or do you mean they own it but your grandparents live there? 

It’s in my mums name. They died 15 years ago. It’s not rented out, mum just uses it as a holiday home really. 

Maybe your mum could gift that to you to "balance the books" as it were. 😉

I had considered this as an option although I don’t think my brother would be happy with that. As that property is probably worth £100k more than the one he has. That said, it is not generating any income so maybe the net difference is not that vast. My mum wouldn’t sell it or rent it out, it’s too emotive for her. Long story! 

SeniorSam

Jules, lots to think about. However, if you have spoken with your father and he knows of your concern, he may wish to 'balance the account' somewhat so that there is no falling out.

Whatever your father ops to do in the way of correcting the imbalance must be up to him, but it would not be so difficult to balance the books if he really wants to.

Your father only needs to work out what advantage your brother has or will receive based on the present arrangements and if a 'balance ' is wanted, then all he needs do is to visit a solicitor and arrange for a codicil to his Will to make the split fair. 

It is most important that if he chooses to do this, he also draws up a 'letter of wishes' to be with the codicil, which clearly lays out his reasons for the changes, namely to ensure that both his sons are treated fairly and that they should understand the changes are hopefully so that his sons can feel he has thought equally about them.

Both sons should receive a copy of the codicil and letter of wishes, which should avoid any chance of contesting the Will at a later date. The solicitor would be able to help clarify these changes with your father so that he is completly clear that the intention is of his choosing.

I hope that this helps and that the family remains close.

Sam

Sea_Shell

@SeniorSam

As both parents are still alive, and their wills currently leave everything to each other in the first instance, then BOTH wills need amending, assuming they both want the same thing (outcome) in respect of treating their son and *daughter equally.

As they still have a substantial joint estate (~£1m), they hopefully won't need to worry about being able to pay for care in later life if needed, but that can quickly use up a large portion of their assets, especially for a surviving spouse.   Although, at least they shouldn't have to worry about falling foul of Deprivation of Assets rules. 


*I think the OP is female. 

Juleszoemay

Thanks Sam, 

I do think he wants to. But he doesn’t know how to calculate the advantage my brother has with being given the BTL property because that is, of course, first generating income and secondly increasing in value every day. How would you suggest that element is dealt with please? 

Thanks 😊 

Juleszoemay

Yes seashell, I already assumed both parents would need to reflect one another 😊 

and yes, I’m a daughter lol