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Joshua, Lawyer
Category: Law
Satisfied Customers: 30008
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I am intending to borrow a significant sum of money from an

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Hello, I am intending to borrow a significant sum of money from an elderly family member, from whom my wife as only child would expect to inherit the estate, to purchase shares in a private company. It is planned to sell my shares, along with the other majority shareholder, when the business is sold in 3-5 years.
JA: Where are you? It matters because laws vary by location.
Customer: OK, in the UK!
JA: What steps have you taken so far?
Customer: My question concerns how to write a loan note, so that the elderly relative is protected. What happens in the event that she does not survive the 3-5 year period?
JA: The Lawyer will be able to walk you through that. Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: Let's start with that. thanks

Hello and thank you for your question. My name is ***** ***** I will be very pleased to assist you. I'm a practising lawyer in England with over 15 years’ experience. Please be aware that although I will endeavour to reply to you promptly, I am also in full time private practice and so I may not be available to respond immediately and it may also take me a few minutes to prepare a reply. The site will notify you as soon as I respond. I look forward to working with you to answer your question fully.

  1. May I confirm this is a simple loan from your relative and they will not be involved in any way in terms of what you purchase will do with the money please?
  2. is any interest to be charged?
  3. is any security to be taken by your relative against your assets?
Customer: replied 14 days ago.
Hi Joshua,
1. Yes, it is a simple loan.
2. No interest wil be charged
3. No security will be taken.

thank you. You could either employ a solicitor to prepare a loan agreement is between you and your relative. Alternatively, you could consider use of an online drafting service such as the following to prepare a document in this respect instead:

It is important that your relative understands that by not taking security in respect of the loan, if you were to be made bankrupt, they may not be able to recover the full balance of the loan from you. In addition, the loan agreement will be enforceable for up to 6 years under the limitation act and accordingly, if repayment is not envisaged until after that point, though I note from what you say it is, then consideration should be given to signing the document as a deed which is enforceable for up to 12 years. Deeds will not generally be offered by online drafting services as it is a reserved legal practice which any licensed lawyers can carry out.

I hope the above is of some assistance but if you have any further questions, please revert to me.

Customer: replied 14 days ago.
Many thanks Joshua. If the relatie did not survive the investment period, then I assume that the loan amount would be repayable to her estate and duties payable if applicable. It may be better to gift the investment amount, but offer her some protection in terms of funds required for care?

your understanding is precisely correct in this respect. In terms of your proposal to deal with this however in the gift other than an outright gift is likely to amount to a gift with reservation which was anti-avoidance legislation put in place to prevent exactly the sort of arrangements such as that you propose above. If there is any reservation of benefit in respect of the gift, the amount is likely to be counted as an asset of the estate whether or not it is actually in the estate at the time of their death

Customer: replied 14 days ago.
Thanks Johua, that clears that one up then! But one more question: If the estate mops up the debt as an asset, I assume that the heir(s) - in this case my wife - would inherit and be entitled to collect (or not) the debt? Or would this fall foul of the legislation too.
Customer: replied 14 days ago.
I imagine that in this case, the debt value would count towards any tax obligation, so it would make no difference?

The debt would count as an asset as you say and would be assessed for tax. It would then be up to the executor to collect the debt or forgive the debt on the express instructions of your wife.

Customer: replied 14 days ago.
Many thanks Joshua. That clears up my questions. Good night.

Thank you again for visiting JustAnswer and see you again in the future I hope.

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