Loaning money between family members

[Stevenj214]

I know it's a potential recipe for disaster, but my Gran has decided to loan my Uncle a substatial amount of money. 5 figures. Nothing to be paid back for 12 months, then payment terms to be agreed, zero interest. Money to be paid back via bank transfer so there is a record.

Does anyone have a standard letter or could knock one up that they could both sign just as a record of the loan?

I know it won't be up to court standards but it's purpose is simply so there is a more formal record if, for any reason, someone else has to take control of my Gran's finances.

[ShadownINja]

Well, she should consider it lost. There is one legal way round it but it's not pretty; should she die within 7 years, he will at least have to pay tax (CGT) on it, so if he isn't planning on paying it back, he should keep back a percentage to cover it or he'll be screwed by the law. Unless he admits it is a loan to be paid back to her estate, in which case, he doesn't have to pay tax and her estate gets the full amount back. (I'm not a lawyer or accountant but that's my understanding of it.)

[-Pete-]

From what I know of the world, she will be very unlikely to ever see the money again. Unless she can formally and legally buy something from him (part of his house, if he owns one and the mortgage company will allow it) then aside from the 7 years rule if she dies, there is no reason why he will need to repay the loan or pay interest. Bear in mind if she buys part of his house, I believe stamp duty may be payable. What does your Mum/Dad think about it all?

[Stevenj214]

Cheers guys. As I said, I know it is a potential recipe for disaster but everyone involved is happy to follow my gran's wishes.

Working on the assumption that the money will be paid back. Either to my Gran or my Gran's estate when the time comes. Is there anything simple that can be drawn up and signed just to formalise it a bit? Or is it enough to keep a simple record of the loan, with other people involved being 'witnesses' to the terms?

[Deva Link]

Are your Gran and Uncle happy for there to be a record - your Gran may want to do it on trust and your Uncle may not be keen to sign something unless he has to?

[Stevenj214]

Deva Link said:

Are your Gran and Uncle happy for there to be a record - your Gran may want to do it on trust and your Uncle may not be keen to sign something unless he has to?

I've spoken to them and they both think it's a good idea.

[silvagod]

IMHO, if you lend money to a family member and you are considering legal paperwork to cover it, then either it shouldn't be happening or the family is dysfunctional.

I have lent and borrowed money to and from family members quite a lot and have never thought of worrying about it being paid back. That's what families are for!