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JGM, Solicitor
Category: Law
Satisfied Customers: 13511
Experience:  30 years as a practising solicitor.
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Trying to draft a document explaining a financial gift given

Customer Question

Good EveningTrying to draft a document explaining a financial gift given to my daughter 13 months ago.
In brief the money was from the part sale of my house. With another daughter I gifted her part of the house and her husband brought the other share equalling 100% to them, that was done through solicitors etc and is all finished.It's the other daughter as mentioned in the first line that needs some sort of legal document explaining the gift given in May 2017. Not all the sale money from the house was given to her, I have kept some for myself. She and her husband also continue to look after me in their new address.
Part of that money I gave to her, is repayment for monies loaned by her & her husband, over a 6 year period to refurbish my then home prior to the sale.A single page document has been drafted by us, explaining the gift, where the money came from, and that a large portion of that money given was a loan.
Would like to make such a document legal to protect this daughter. Does it sound feasible?
Thank You *****
Submitted: 9 months ago.
Category: Law
Expert:  JGM replied 9 months ago.

Thanks for your question. I will try to help you. You say you are trying to protect the daughter that received cash from you? Is that correct? Who does she need protection from and what is the purpose of the legal document? Generally can you explain the situation a little more?

Customer: replied 9 months ago.
Hi. Protection in the form of IHT and maybe other family members if I die.
Expert:  JGM replied 9 months ago.

Do you have a will? If so then what you need to to is type out, date and sign a letter detailing the transactions to which you refer and the money given to your daughter during your lifetime and why she received it, ie, repayment of loan, part gift etc. It is really a form of “letter of wishes” which will be placed with your will so as to assist your executors in dealing with any IHT matters or challenges from other family members. There is no particular form as it does not really have to be a formal legal document. It is more in the form of a letter of explanation to clarify what was done in your lifetime and why.

Customer: replied 9 months ago.
That does make sense. My current Will is from 2011 so does need to updated. So to recap in a sense this is a "retrospec letter of wishes" as I already gave most of what I have to two of my daughters last year. One documented, and the other will be through this?
As it stands at the moment the daughter whom received the money, I live with her and her family and they provide for me with care and they pay all the bills, I sometimes help with the groceries, and petrol etc. It's similar to how it has been, over the last 25 or more years. The only difference, I am now staying in her newly acquired rented accommodation, but not paying her any rent, or paying any household bills.Does this mean, it is a gift with reservations?
If so should a tenancy agreement be drawn up between us? Backdated and I pay a reasonable/market rate to my daughter and son in law?We have all been here since November 2017 and my name is ***** ***** tenancy agreement as a occupant with the letting agency so I'm not in breach. It's the gift that I wouldn't want to be breached and of course, I would want the gift for IHT reasons to be valid from the date it was given being May 2017.Thank You
Expert:  JGM replied 9 months ago.

Your first paragraph: all correct. Thereafter a gift with reservation is for example where you retain the benefit of living in a house which you have gifted away. You have not retained anything here unless I have misunderstood you? You have gifted some money and you have repaid a loan as well?

Customer: replied 9 months ago.
The house I sold, i'm no longer living in. Yes a loan has been repaid. The gifted money, it could be looked at possibly, that i'm benefiting from it as this daughter is using the money given for rent at the moment, and is looking to buy a house, either here or abroad, which will accommodate all of us including myself, and just like I have here, I will continue to have my own bedroom and private bathroom.
Isn't this me benefitting as I'm not paying for this? Seems that way according to tax and gifts law from what I've read?
Shouldn't I be paying rent now and when they buy their house?Also the letter of wishes doesn't seem legally binding, ok the money has already gone to her, but I still worry from the daughter who has already, officially benefited, and also from my other daughter (3 in total) whom has benefitted from me for many years, and is due not to get anything from me at all, this time around nor her children. Of course in my letter of wishes I will specify that this daughter shall receive nothing from me and that she wasn't meant to receive anything when money/gifts were being given in May 2017.
I will also specify that the one that got 47% of the property isn't entitled to anymore.
I wouldn't want them trying to dispute the gift money or the loan money paid to this daughter who's future i'm trying to protect. (My daughter and son in law can prove how much money was spent on the renovation if ever that came in to question). The loan part is very important to them, to make it clear to all, that not all the money they received was a gift so should be exempt from IHT and anyone questioning their involvement. Also of course that the money received was a gift and not stolen from me, however that money was transferred to this daughter via a solicitor, and we still live together.
Expert:  JGM replied 9 months ago.

The letter of wishes should be more than sufficient to deal with why you did what you did and shy your will is drafted the way it is. As regards ***** ***** by way of reservation, I don’t think that the current rental situation should be affected. If they then buy a house with your money and you live there rent free I can see the force of that argument if the house is within the UK although If it is abroad and you are all living away from the UK you may become exempt from UK inheritance taxes completely.

Customer: replied 9 months ago.
With the current rental situation, could you please get someone to write to me later. Currently living rent free, with my daughter, not paying bills, but provided her with money, which could be said, is being used to pay for my cosy accommodation. This really needs to be clear, if were doing wrong then a tenancy agreement, needs to be put in place and I must pay something. HMRC doesn't quite mention, my have my exact situation. But in short it's: Sale money given to me, then money given to daughter, me living rent free.The letter of wishes to make it stronger, especially if any circumstances change, should the daughter i'm living with be a Trustor / Trustee / Executor what ever it is the person that can alter.
And if any claims or accusations were to happen whilst i'm alive, regardless of my mental state\capacity can any of this be used to defend my daughter and myself?
Customer: replied 9 months ago.
in relation to original question protecting daughter with a document, sounds like it will be letter of wishes.
With the current gift of money: Sale money paid to me, then most of that money given to daughter, and me living rent & bill free with this daughter and her privately rented accommodation.
Is this reservations?Help making a tenancy agreement , I understand of course would be another question. thanks