£20k loan/gift from elderly parent(s)

Cobbler_tone

Hi,
My mum (83) is going to give me £20k to cover the final part of my divorce settlement, it's a big number. We haven't fully had the discussion about payback and if I do it as a loan I will be in a position to cover it over the next two years. My dad is also still around at 87 and I have two older brothers and the three of us are the beneficiaries of their estate.

What is the best way to do this and what are the implications if the worst happens to her and/or my dad?
Firstly, how would this be tracked down and I guess the loan would be owed to her estate, before CGT is considered?
I hope none of this happens but trying to think of the most robust way of facilitating it. My dad (bless him) suggested they give me £10k each. 

Thank you

Keep_pedalling

CGT won’t come into it. Whether to make this a gift or a lone is going to be very much on what their financial position is. If they have ample savings and won’t miss it a gift is the better option especially if their estate is in IHT territory, but if it is going to leave them without an emergency fund then it should be a loan. 

Cobbler_tone

I certainly wouldn’t consider a loan/gift if they couldn’t afford it or if it impacted on their life style. They have a healthy income and very few outgoings, which has been the case for the past 25 years. They are old school though and very much ‘you get the money when they’re gone’.

mebu60

Perhaps it could be a gift as an early payment of part of your inheritance with suitable adjustment made at the time of inheritance with your siblings? This would need to be documented and understood by all. Who is/are the executors?
If your parents haven't made any gifts this current tax year or last then on current pre-Budget rules they have £6k each that can be gifted outside of IHT and 7 years to survive for all of it to be exempt. There is no CGT involved. 

Cobbler_tone

mebu60 said:

Perhaps it could be a gift as an early payment of part of your inheritance with suitable adjustment made at the time of inheritance with your siblings? This would need to be documented and understood by all. Who is/are the executors?
If your parents haven't made any gifts this current tax year or last then on current pre-Budget rules they have £6k each that can be gifted outside of IHT and 7 years to survive for all of it to be exempt. There is no CGT involved. 

Thank you. I am one of the executors. It is a short term issue for me as have a healthy pension which I could technically access now but still want to contribute. 

I was thinking of the inheritance route but they may well gift my brothers the same.

mebu60

Cobbler_tone said:

mebu60 said:

Perhaps it could be a gift as an early payment of part of your inheritance with suitable adjustment made at the time of inheritance with your siblings? This would need to be documented and understood by all. Who is/are the executors?
If your parents haven't made any gifts this current tax year or last then on current pre-Budget rules they have £6k each that can be gifted outside of IHT and 7 years to survive for all of it to be exempt. There is no CGT involved. 

Thank you. I am one of the executors. It is a short term issue for me as have a healthy pension which I could technically access now but still want to contribute. 

I was thinking of the inheritance route but they may well gift my brothers the same.

Good plan. Surviving seven years after would be helpful if they exceed IHT thresholds but a disbursement now if affordable is a good move. Doesn't sound like there's any immediate danger of 'deprivation of assets' should they go into care either. 

Cobbler_tone

mebu60 said:

Cobbler_tone said:

mebu60 said:

Perhaps it could be a gift as an early payment of part of your inheritance with suitable adjustment made at the time of inheritance with your siblings? This would need to be documented and understood by all. Who is/are the executors?
If your parents haven't made any gifts this current tax year or last then on current pre-Budget rules they have £6k each that can be gifted outside of IHT and 7 years to survive for all of it to be exempt. There is no CGT involved. 

Thank you. I am one of the executors. It is a short term issue for me as have a healthy pension which I could technically access now but still want to contribute. 

I was thinking of the inheritance route but they may well gift my brothers the same.

Good plan. Surviving seven years after would be helpful if they exceed IHT thresholds but a disbursement now if affordable is a good move. Doesn't sound like there's any immediate danger of 'deprivation of assets' should they go into care either. 

Thank you. I have no idea on the IHT threshold. They live in a modest property (probably £250k) but absolutely no idea how much they have squirrelled away. Considering my dad retired (with redundancy and private pension) 27 years ago, my mum has mentioned that she has never spent any of her state pension (dad gives her housekeeping!) and they lead a very frugal and basic life I'd imagine they have a bit floating around.
My hope of course is that they live an even longer life and fully prepared to give them any money back. I'm not assuming at this point it will be a gift but you know how parents can be. 

Nasqueron

Cobbler_tone said:

mebu60 said:

Cobbler_tone said:

mebu60 said:

Perhaps it could be a gift as an early payment of part of your inheritance with suitable adjustment made at the time of inheritance with your siblings? This would need to be documented and understood by all. Who is/are the executors?
If your parents haven't made any gifts this current tax year or last then on current pre-Budget rules they have £6k each that can be gifted outside of IHT and 7 years to survive for all of it to be exempt. There is no CGT involved. 

Thank you. I am one of the executors. It is a short term issue for me as have a healthy pension which I could technically access now but still want to contribute. 

I was thinking of the inheritance route but they may well gift my brothers the same.

Good plan. Surviving seven years after would be helpful if they exceed IHT thresholds but a disbursement now if affordable is a good move. Doesn't sound like there's any immediate danger of 'deprivation of assets' should they go into care either. 

Thank you. I have no idea on the IHT threshold. They live in a modest property (probably £250k) but absolutely no idea how much they have squirrelled away. Considering my dad retired (with redundancy and private pension) 27 years ago, my mum has mentioned that she has never spent any of her state pension (dad gives her housekeeping!) and they lead a very frugal and basic life I'd imagine they have a bit floating around.
My hope of course is that they live an even longer life and fully prepared to give them any money back. I'm not assuming at this point it will be a gift but you know how parents can be. 

If they are married they'll have pretty much £1m of IHT threshold so you should be fine provided they don't have tonnes of cash lying around and even then, you pay tax only on the bit above the limit