Best solution?

wolveswolves29

Basically to cut a long story short I’m about 30k debt , I could DMP but the other option is family member who is elderly could pay off part of the debt and make it more manageable, but I’m worried if anything happens to them I’d be liable for inheritance tax, would it still count even if there was a written up contract with how much I would be paying them back at a considerable lower payback then the debt it self?

EssexHebridean

There are more questions here before we get to the answer, I think. 

Essentially, being "bailed out of debt" is frequently not the solution that people think it will be - in some circumstances it can work - debt as a result of being taken to the cleaners by a cowboy builder who has taken the money and run, for example, of having legal costs as a result of something well out of our control. Where debt has been accrued as a result of over spending, addiction, generally living beyond our means though, not so much, as the "bail out" means that there is no incentive to address and change the behaviours that have caused the issue in the first place. what tends to happen in that situation is that give it a few years and the debt has mounted again. So the circumstances can make a dig difference here.

As with all newcomers here, I'd suggest that your first step is to put together your SOA (Statement of Affairs) - there is a link to a calculator for this in my signature below) as that will help to show how doable a DMP is. If you feel comfortable to do so then using the "format for MSE" option and copying and pasting it here would mean we could take a better informed view on your next best steps. 

The inheritance tax question is simply too complex for us to answer here - but yes, gifts given within a person's lifetime can be taken into account as part of their estate for the purposes of IHT. 
 

RAS

With regarding IHT, you would not be liable, it would be paid by the estate if it is liable and most aren't.

With a written up contract, you would still owe the estate the money, so it wouldn't make any difference to the IHT owed anyway.

But you really need to understand how you got into debt and whether your budget really does allow you to repay this money. It's one thing defaulting on a consumer debt which has limited consequences and another failing to return money to an elderly family member, particularly if they need the money in the future.

It might be useful to do a Statement of Affairs aka budget and you could share it is you wish so we can suggest all the options.

wolveswolves29

RAS said:

With regarding IHT, you would not be liable, it would be paid by the estate if it is liable and most aren't.

With a written up contract, you would still owe the estate the money, so it wouldn't make any difference to the IHT owed anyway.

But you really need to understand how you got into debt and whether your budget really does allow you to repay this money. It's one thing defaulting on a consumer debt which has limited consequences and another failing to return money to an elderly family member, particularly if they need the money in the future.

It might be useful to do a Statement of Affairs aka budget and you could share it is you wish so we can suggest all the options.

Thank you for the reply , when Iv got five I will give a budget, they monies of the elderly relative would not be noticed if they give it me for it, Iv never borrowed for no reason of family and paid back, its basically a snowball off debt one thing after another , just lost my way with it, I’m working in secure job that will hopefully only pay better in time, I would have no issue paying back what they want and would take approx 4 years rather then 6 with interest of loans/credit cards

p00hsticks

wolveswolves29 said:

I’m worried if anything happens to them I’d be liable for inheritance tax, would it still count even if there was a written up contract with how much I would be paying them back at a considerable lower payback then the debt it self?

Rather than a concern about inheritance tax, I think more of a concern might be that if it is to be a loan rather than a gift, then if the death occurred before the loan was fully repaid, the executors of the estate might want the debt settled straight away. 

sourcrates

Inheritance tax threshold is £325,000.

If their assets add up to less than that, it won`t be an issue.

But honestly, look at your own solutions to this matter, rather than hope for a bailout.