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Stuart J
Stuart J, Solicitor
Category: Property Law
Satisfied Customers: 22400
Experience:  PGD Law. 20 years legal profession, 6 as partner in High Street Practice
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Hi, my daughter wants to buy a house. She already owns her

Customer Question

Hi,

my daughter wants to buy a house. She already owns her own house which she has not sold yet, so my intention is to loan her the money on an interest free basis to purchase the house, then when she has sold the one she currently owns she can pay me back (they are roughly the same value). Is this a problem legally ? I realise that if she did not pay me back, then when I died she would be liable to pay inheritance tax on the money, but other than that I am not aware of any complications, but just wanted to check.

Kind Regards
Caroline Armstrong
Submitted: 3 years ago.
Category: Property Law
Expert:  Stuart J replied 3 years ago.
What is the value of the property?
Customer: replied 3 years ago.


£185,000

Expert:  Stuart J replied 3 years ago.


Thank you. This is an
arrangement between family, so there is no consumer credit act criteria.

There is nothing legally to
stop you doing this, but I would suggest that you took charge out over the
property so that if ever she comes to sell, you get paid. Bearing in mind that
you do not know how long the original property is going to take to sell so you
may be waiting to get your money back for some time.



I would certainly draft up an
agreement of some description whereby she agrees to pay you within a particular
period of time and she confirms that the agreement is intended to be legally
binding and is not just a family arrangement. ( those are actually the legal
words).



I would also suggest that she
takes independent legal advice on what she is agreeing to so that at some stage
in the future, she cannot allege that you pressurised her into doing this. To
answer your question, from a legal point of view, there is no problem
whatsoever that I can see with what you are going to do.



With regard to inheritance tax,
that is payable on anything in your state which does not pass to a spouse,
which is over £325,000. Provided you live for seven years after the money is
paid over there is potentially no inheritance tax payable.



I say potentially because if
this is a loan, intending to be repaid, then it doesn't matter how long has
passed, inheritance tax, and applicable is still payable.



Basically, if it is a loan it
may be taxable: if it is a gift it is exempt provided you would survive seven
years.



Can I help further?





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