In worrying about lending money to parents?

[GooseyLoosey]

Would just like to get some perspective on this.

I have a reasonable amount of money set aside for the dcs - it is a combination of money saved by me, given to me by my parents (who have been very generous and are lovely) and some left to me by family.

My parents would like to borrow this money to buy a house closer to me and will repay me when they sell their current house.

I have no problem at all with this. My only issue is that only one is a parent, the other is a step parent and whilst I like them very much, am not completely clear how much I trust them (this is just a niggling feeling, not based on anything that has actually happened). If anything were to happen to my parent before the money was repaid, I worry about what would happen.

Problem is I don't know how to raise the subject and what to say without ruining the relationships within the family.

AIBU to even be thinking about raising it? What would you do?

Depends how large a sum it is - if it's a considerable amount then I think having an agreement in place is wise.

YANBU. Why can't they do what everyone else does, sell one house and then move to a second one.

Or why can't they sell their house, rent somewhere for a couple of months, and then find a new house they like.

I can't see why they need to have two houses. I, like you, would be puzzled and a bbit cautious. In fact if you don't have a close enough relationship to talk openly about this stuff, a big red alarm bell would be going off.

YANBU to be thinking about it, it's your dc's money so of course you're going to be concerened about it.

I think I'd do some serious research about getting something legally binding written down and signed by all the adults concered. You need to think about what you're going to do if their house takes a while to sell, what happens if it doesn't sell at all? or goes for less than they need to repay?

I'd go to a solicitor (on the free half hour introductory basis) and ask for advice. Your parents should be paying for legal advice if it comes to paying for anything.

Why can't they sell and buy in one transaction like normal sales?

I dont think you're being unreasonable at all.

In your position I would tell your parent you'll lend them the money but you do want a contractual loan agreement, secured on the house. Another way around this is that you buy the new house and transfer ownership once the loan is repaid (might be easier if the money you lend them covers the whole of the purchase of the new house- if it only partly covers it, secured loan would be better).

Then, if your parent died, you would own the house or have a claim over it in the event the loan was not repaid.

Unfortunately I know a few cases where people have been stung lending large amounts of money to relatives and whilst it's family, well.....I think the side of caution is the side to be on.

Is there any reason they can't sell their house first before buying one closer to you? That is what most people do.

It depends on how soon you might need the money. In the current climate it might take many months to sell their house. It might not sell at all if they are unrealistic about what it is worth. So if you needed the money and it was still tied up there then that could cause problems.

Definetly depends on the sum of money. If we're talking 5k or so then I would do it. If we're talking 50k I'd probably say no to be honest.

Cross posted with several people who are thinking along the same lines as me!

If you have concerns can you not tell them that the money is tied up in investments / savings plans and that if you give it to them you stand to lose interest / value of investments that have gone down in the current economic climate? Although not strictly true it might stop arguments / feelings of resentment that it sounds as if you don't want

You should always ask yourself how much you would miss the cash if they buggered off to Belize. If it's a lot, don't lend it. You should only lend money you can afford to lose.

I would have to say 'no' to them if in your situation. it's family, and lending money to family (large amounts) is never a good idea. They may not rush to pay you back. If you really were to go ahead, you'd be very wise to set up a written contract where you all know where you stand if something was to go wrong.

You need it in writing, as officious as that sounds, if you choose to do it. If you give it to them and god forbid, something awful happens then strictly speaking, it will be counted as "their money" and part of their estate and will pass as per their will etc. and you may not be able to simply recover the money. And if you have given it to both of them, and one dies, then the other gets it and.... etc etc. complicated!

Also, be very clear in your agreement who you are lending it to. It might be simpler to lend it to your parent of the couple from a legal point of view, and that in turn might give you some extra peace of mind.

Hope that is clear - typed in a bit of a rush.

'neither a borrower nor lender be' but if you must then sit down and be completely open with your parents(not about the not trusting the step though!)thats a definite mood killer. Bring up the idea of a legally binding contract and explain it's for the DCs' sake(what parent would begrudge you that!). If you chicken out,and still go ahead with it,then be ready to possibly have some serious problems with your parents.Be a brave girl and be honest.

I would also be very reluctant to lend. They do not know for sure that their house will sell. Don't see why they can't do it the way everyone else does. As alict suggested I would say it's tied up and you can't get to it now.If you do decide to lend you must have a legal contract. If something happened to both of them, your step parents next of kin could end up inheriting your money. Your parents shouldn't take offence at this being pointed out. Maybe tackle this with your bio parent alone and say you must protect interests of your dc

I agree with what anonymousbird says.

Would also be easier then to insert something into legal document about WHEN you get your money.

And might help you to introduce the possibility of their house not selling for quite enough money, what happens then?

Somehow, you need a third party to mediate a discussion. Or you both need to write down a list of questions/issues to discuss.

I would say that it's actually in trust for your children and you can't physically get at it anyway.

YANBU I wouldn't do it. You say you don't absolutely trust them. It's bound to end badly.

Like everyone else, I want to know why they can't do what everyone else does sell one house and then move to another.

I would lend them the money if you're pretty sure you won't need it back in the near future. I would, however, get the loan agreement drawn up by a solicitor.

I recently borrowed a substantial amount of money from my parents to smooth a house move. We explained all to the solicitor handling the sale/purchase and he put together an agreement that the amount was repayable by either me or my husband (jointly or seperately) within 5 years. At the same time, a statement was added to the deeds of our new house to the effect that the loan is secured on it and must be repaid in the event of the sale of the house (this is effectively the same statement a mortgage company have on the deeds. It is normally fine to have more than one such statement, as long as all parties are happy with the total amount of loan secured on the property).

Phew, that was long! I'm not a legal bod, but just sharing my experience.

What if house prices plummet between them buying one house and selling the other one? They may not have enough to repay you...

It is going to be really difficult to discuss this without there being bad feeling - especially as some of the money came from them in the first place.

I guess if you are concerned then it is a sizeable sum? Maybe 50% or more of the cost of the new house?

The best route around it would be if they are getting on a bit; that way you could play the line that if one of them had to go into dependant care before the second property was sold, then all of the money would be lost forever because it would be treated as part of their estate and used for care home fees. This eventuality could only be avoided if there was a legal loan drafted up (don't go down the shared ownership of new home route as it is expensive to reverse out of this if you wanted to at a later stage).

Second reaosn to give them is that if they both died in an accident then the money you lend them will be subject to 40% tax as it will be treated as part of their estate

The other possible line to play is that if they don't have a loan drfated up and if you yourself died within the next 7 years this money would be treated as a gift and they would have to pay 40% inheritence tax on the amount you give them now.

I would do one of these if I were in your shoes, or, if I could afford it, I would buy their new house myself (and get them to pay me a market rent on it for a period to establish it as an arms-length transaction) and keep it in my own name because then they would (a) have disposable money to spend as they like and (b) would never have to sell this new house if they went into dependant care.

The current political state would make all of these 'sensible' conversations to have, even if you trusted your steparent completely.

I forgot to mention by the way that if I could afford it then I absolutely would lend in this situation, and I would not stipulate any conditions or end-dates. It's family, and it sounds as if they would do the same for you in a heartbeat? No money is worth risking a strong family bond.

I really depends on your experience, doesn't it? Squiffy said 'No money is worth risking a strong family bond' and to me that's exactly the reason not to do it. My cousin no longer speaks to her father and step mum. They fell out over money.

dont do it. id be suspicious that they even needed the money in those circumstances. you buy a house when you have sold yours, thats how it works, it sounds like they'll buy a house out of their means and try and pay you back in installments over years rather than a lump sum straight away.

i would do what another poster has suggested, say you've already put it in trust and you cant get at it.

I would be extremely wary of lending them all money to buy another house in the current market. I presume they have found a house they like and want to buy it but canot sell their own. In essence, that means they are either asking too much for their own house and / or paying too much for the one they are buying.

That said, I did have a similar situation with my parents. You may want to try the solution I came to.

My parents had stupidly contracted to buy a house. They were retiring from farming but had not contracted to sell their farm yet. They needed money to complete on the purchase of the new house but the bank would not lend them any money as a bridging loan (as they had no earnings) to complete on the purchase. It was a crisis and I was extremely annoyed that my parents had put themselves in that position. They were close to default on the purchase contract on the house.

I spoke to the bank and agreed the bank would lend my parents the money they needed. The bank would take the farm and the house as security on the loan and I would deposit a sum of money equal to an entire year of interest on the loan in the bank. The bank were then totallly secured for both the loan and the interest.

The only money I had at risk was the sum of money I had deposited in the bank. You may want to offer the same deal. Find a bank to lend the money but you only offer to guarantee the interest. Also find out how realistic your parents are being about the price they will achieve on the hosue they will sell. Also check they are not overpaying on the house they are buying.

Finally get it all documented and signed by both parents.

haven't had time to read all the replies, but i've had a similar situation but the other way round.

my father lent us some money but there was no paperwork to prove it. he asked us very nicely (and to be fair we'd already thought of it) if he could have a letter detailing the loan, and what amount of interest we were paying (this was agreed before we accepted the loan).

Very basic letter but its to show the right legal bods should anything happen to myself or husband in the meantime.

I have heard far too many situations where money has caused massive family rucks that few have come back from.

You say "reasonable amount of money" - i'm
assuming from that we're talking about "a few thousand" (sorry if i'm jumping the gun there ). It must be a legally binding document before anyone goes down that road - makes complete sense.

I also don't understand why they can't sell their current house before buying a new one - that in itself is rather odd?!