Lending to father in law

by **steve234** on Mon Aug 15, 2011 4:01 pm

My Father in-law (who is 75) is in the progerss of downsizing. He has already bought the new property to live in and is in the process of selling his current home, which is taking longer than expected. In order to cover the costs of running two homes and also work required on the new home I have agreed to lend him approx £80k to help with cash flow.

I had just intended to wire him the funds. However (god forbid) should either one of us pass away once the funds are transferred and without any formal documentation that this is a loan, would the initial transfer of funds or the return payment be incorrectly considered as a gift and subject to inheritance tax. Secondly if there is any risk of this being the case what is the best/simplest way to document the loan such that it doesn't attract inheritance tax. e.g. would an email suffice?

Many thanks in advance for any advice

by **Lee Young** on Mon Aug 15, 2011 4:09 pm

Best advice is to put in place a simple loan agreement, all signed up before the transfer takes place, then dated on the day of the cash transfer. Just because it is family does not mean that the appropriate paperwork shouldn't be done.

by **taxationuk** on Mon Aug 15, 2011 4:39 pm

I agree with Lee, a simple Loan Agreement will cover the issues. If you require any help with this please do not hesitate to contact me.

Kind regards

Terry Hodge
th@taxationuk.com