family loan repayment and house purchase

Wirebird

Hi, my son lent my mother some money as a bridging loan to buy a house, and the loan agreement was accepted by her solicitors. She has paid my son back. Now my son is trying to buy a house and his conveyancers are trying to get him and her to sign a document saying he is the giftee of this loan repayment and she wants no charge on his house. The original loan agreement made no mention of his house purchase, which did not even exist at the time. To me this has legal implications because my understanding is that if his money is called a gift from her, it enters her estate and he will pay inheritance tax on it when she dies (she is 100 so that is likely sooner rather than later). Since it is not a gift the point about her not wanting a charge on the house is irrelevant. I am concerned that my son's conveyancer's fraud team has asked for this inaccurate document to be signed. What would forumites do to avoid any legal and financial complications whilst also keeping the conveyancer happy?

Keep_pedalling

His solicitors are wrong but even is they signed this it would not mean your son would have to pay IHT, it is still a loan repayment and he has documented proof of this. What they should be looking at is where the money he lent her came from before he made the loan.

Signing this would not mean he would have to pay IHT on it, as it was never part of her estate. Even if this was a gift the giftee is only responsable for IHT if the gifts exceeds £325k and the estate exceeds the total NRBs, which would be between £500k and £1M for your mother depending on her marital status and if a widow how much of her husbands estate she inherited. 

Bigphil1474

Are they asking him to sign to say he is a giftee of the loan repayment, or just a giftee of the money that was used to repay the loan? Clearly if it's identified as a loan repayment then it's obviously not part of her estate. For your son's money laundering checks, as above, they should really be asking where he got the money to lend in the first place.