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?

Can't you just say that the money is in an account which requires 90 days notice or something - or that if you take out the money from the 'account' its in you lose the annual 'bonus' interest - Just a thought.

At the end of the day my personal thoughts are that if my parents ever needed financial assistance I would help them like a shot - but we have that trust between us without a question or doubt. My parents would not sleep until they had paid me back - thats just the way they are.

But everyones relationship with their parents is different and I suppose if one was a step parent then I would most prob be asking questions and being slightly worried.

Thanks all - sorry I didn't post back yesterday - minor domestic emergency. Its really useful to have all of your perspectives.

Interesting that you all say to have an agreement - I worry that if I ask my mother for that she will be offended. I would trust my mother to the ends of the earth, and I love my step dad - I just don't trust him in the same all encompassing way. Its no problem getting something drafted - I'm a lawyer myself .

The loan is for tens of thousands of pounds rather than just a few thousand.

Beta - your solution sounds interesting.

They don't really have the option to sell their current house and then buy this one. We have all talked about them moving closer to us for some time but the area we live in is very expensive. This is the only property they will ever be able to afford where we live.

Families are hard aren't they!

I wouldn't do it personally. Especially with one being a step parent.

There is a presumption in law that agreements between family members aren't legally binding so you MUST get some kind of proper written agreement if you are going to do this.

Thanks SunnyD - I must admit, I had no idea about that!

Geek - I can't really turn them down without causing family melt down and I wouldn't do that for the world.

I think it is also reasonable to ask them to pay some sort of interest on the loan if it is going to be for a reasonable amount of time; as you say it is your dcs nest egg and you want to do the best by them as you can. Although if your parents have given you some of the money in the first place then you might want to skip this

However - from a tax / inheritance /etc point of view, I think that it is viewed more as a loan if they are paying you some sort of interest on it (given low bank rates, if you pegged it to the Bank of England bank rate that's currently 0.5% that's £50 per £10K that they could pay you which wouldn't be a huge sum (even if you give it back to them in cash) that if it is seen going through your bank accounts will make it look more official.

I am one of those (very few it seems!) people that bought a house before selling the previous and overlapped for a few months. Instead of a bridging loan, we managed to get a mortgage on the new property that wasn't a fancy one with cheap deals/rates and cashbacks that are good if you are moving 'normally' but got one that we could pay back with no early repayment fee. Considerably cheaper than a bridging loan! Might you be able to work something like that in conjunction with beta's idea.

And - if you are a lawyer - won't your parents expect you to want things all nice and legal? You could just say you're an old worrywort lawyer and you know what the govt are like about people moving large sums of money backwards and forwards, and inheritance tax, and money laundering, and needing to keep everything above board for keeping your lawyers registration, and and and yadda yadda yadda (you're the lawyer, I guess you can fill in with all sorts of nice waffle with a high legalese it's not you but me that needs the form scare factor)

Thanks Zipzap - they have agreed that they will pay interest, equal to the invest returns that the money is currently earning. I would lend them the money for nothing, but none of us want the dcs to lose out.

I will knock up a short agreement. Think my mother might be slightly shocked though as they have lent me money before without any formalities. Oh dear!

GooseyLoosey - do remember to declare and pay the tax on the interest. If it is a formal agreement and interest is being paid then it is no different from it being paid to you from your bank or building.

Good point BB - will make sure I remember that.

Be careful. We lent FIL a considerable sum for a 3 month period. Fast forward 2 years and we still don't have it back. Should be coming soon but has not been an easy situation for any of us.