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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3666
Experience:  Solicitors 2 years plus PQE
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Hello, my husband and I wish to take out a loan to open a shop.

Customer Question

Hello, my husband and I wish to take out a loan to open a shop. My mother has offered to lend us the money with a very small interest rate. Is this ok ? My mother is 76 and is not in the best of health. I f my mother died before the end of the loan term what would happen. I know she is only allowed to give £3000 away a year to avoid inheritance tax, I dont understand who pays inheritance tax ???
Kate Harding.
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Alex J. :

Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. How much is your mother proposing to lend you? Does she have any other beneficiaries that may inherit from her estate if she were to pass away?Do you know how much her estate is potentially worth?

JACUSTOMER-aq26gswp- :

Hi, we would want to borrow about £7000. Mum has £50000 in an account and a house worth about 200 thousand, I have 1 sister.

Alex J. :

Hi, Thank you. If the estate is potentially worth less than £325k then inheritance tax is charged at 0%. Tax is only payable if it is worth more than £325k. The tax itself is normally paid for by the executor before the assets are distributed. A loan however would not be taxed as it is not a gift under the will.

Alex J. :

You would still owe the loan but it would be repayable to her estate unless you made some provision that it is not repayable on the date of her death.

JACUSTOMER-aq26gswp- :

Hi, so this would be perfectly ok ? If mum had to go into care she would need to pay for this herself. Could social care services make me give the money back ?

Alex J. :

The actual loan itself is not an issue. Technically anyone without a Consumer Credit Licence should not lend money, but as this is between a parent and child for non commercial interest terms it is unlikely to cause any issues as neither of your are likely to complain about.

Alex J. :

Hi, Thank you - no they would not be able to force you to repay it, as long as it is properly documented that the money was loaned for this anticipated purpose, and was not some deliberate attempt to avoid paying care home fees.

JACUSTOMER-aq26gswp- :

ok thanks very much for your help thats all I needed to know.

Alex J. :

Hi, No problem. Just make sure it is properly documented even in a letter, that this is a loan for your business.

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