Parental Loan to Purchase Property

Parental Loan to Purchase Property

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Parents are providing funds for property purchase by daughter as an interest free loan so I believe no tax implications except that any remaining unpaid loan would still  be part of the parents estate on their death.  Both parties want to protect their position in case the daughter marries or suffers any misfortune and avoid the possibility of the house being sold but proceeds not used to repay the loan. They plan a simple written nil interest loan agreement and to register a legal charge on form CH1 to add some protection. Does anyone have any thoughts please on this plan?

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the sea otter
By memyself-eye
24th Jul 2015 11:20

An issue for a solicitor surely?

Given the potential for getting the 'simple' agreement wrong.

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Replying to rememberscarborough:
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By PatriciaRr
24th Jul 2015 11:34

Agreed and the solicitor is happy with the loan agreement and will be registering the charge but not being helpful in giving an overall view due to "conflict of interest" between parents and daughter. Just wondering whether anyone has thoughts on any tax or practical angles.Property is in daughters name and her main residence and no interest being charged by parents.

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By trust.pem
24th Jul 2015 11:47

No tax issues

other than IHT but you have already mentioned that you understand that the debt will be included within the lenders' estates.

There are no immediate tax issues in respect of the loan/charge.

Incidentally, if the parents want to discharge the loan at some stage in the future this will probably need to be done as a formal deed. It would then be a PET for IHT issues.

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Replying to Sam17:
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By PatriciaRr
24th Jul 2015 12:48

Thank you for that.

Thank you for that.

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