How much can my brother contribute toward deposit?

Mare_hunter

Hi, 
I am a UK public sector worker, whose pay is never enough to buy a 4 bed detached property.  After seeing me struggle for years, my brother wants to help me with buying a new house.  He lives in LA and is well off with 3 houses and lots of money but all made by hard-work from scratch.  No dodgy dealings.  He wants to gift me money which I can pay towards the new house deposit. I have a 700K house in view, which I am planning to buy.  How much money can my brother contribute towards the deposit? Is there a limit? Will it create income tax problem me or attract inheritance tax? Please help. Thank you.  My brother told me he is not expecting it back but I can't live without paying it back.  It will be paid back in some future date with or without interest 

silvercar

If it is a gift (irrespective of whether you intend to repay at some later date) then most lender will be happy with it. Your solicitor will want to satisfy themselves on the source of funds, so your brother may need to provide some evidence, more so as he is abroad.

as far as UK inheritance tax is concerned, if your brother survives 7 years there is no issue, if less then the money may form part of his estate on a sliding scale. If he is not a Uk resident for tax purposes there is no issue here. I haven’t a clue about USA tax rules. If you wished you could make some provision in your will to repay him.

Linton

In the UK there is no tax on receipt of gifts.

In the UK donor Inheritance tax is only an issue for the recipient if the donor dies within 7 years of making the gift and the estate is unable to pay any tax due - thius does some seem likely in your case.  However wont your bother come under US taxation?

The 2 issues I can thnk of are
1) Your bank is likely to see you as a possible Russian oligarch/drug dealer/international gangster if a very large sum of foreign money turns up in your bank account unannounced.  It would be prudent to talk to them beforehand.
2) Your mortgage lender will want to know where the money for the deposit came from and be very confident that any need for repayment wont leave you unable to pay the mortgage.  This isnt my field so someone who knows can advise on that aspect.

I suggest that you get signed documentation from your brother stating that the money is a gft and no repayment of any form is due.  Any misunderstandings can destroy family relationships.as well as worrying mortgage lenders.

Brie

The mortgage lender will want a signed letter from your brother to state that the money is fully a gift and that he is not seeking part ownership of the house.  Your solicitor will know exactly how to word it.  I suggest that once that's sent to brother he sends that and proof of the funds source (as outlined by your bank rather than your mortgage lender if different) scanned by email and then the paper copies fedexed (or similar) so you ensure you have a copy available and an email trail to show the scanned source.