Borrowing from Inheritance

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I have a problem with a sibling borrowing money from an elderly parent & not wanting to make repayment until after parent has died. Sibling has already had £20k & now wants another £20k.

When the first £20k was given, approx 8 years ago, there was no formal agreement made, it was just understood that this money would come from their share of inheritance. Since then sibling has shown themselves to be untrustworthy & I would prefer a formal agreement to be signed before releasing any more money. I would also like to use the opportunity to include the previous amount of £20k as well.

I am happy to use a solicitor to draw up the paperwork but am not sure what to ask for? Elderly parent would prefer not to re draft their Will, but giving the money without any kind of legal forms signed would enable sibling to claim it as a gift. The existing Will leaves the estate divided equally between the 2 of us, after a few smaller bequests have been made.

Is the elderly parent in agreement that a formal document should be drawn up? After all, it's their money? You don't have any rights over it at the moment.

Is the estate likely to attract inheritance tax? If so it's sensible to gift early. That said do you run any risk of having care bills to pay for and be left with nothing whilst this person gets their share in priority?

If your relative is in agreement you could take some legal advice about getting a loan agreement drawn up What would you secure the loan over though? Unless they have some assets that aren't already mortgaged then there is little protection for the money without incurring costly legal fees to get it back if it should be needed.

Yes elderly parent would be happy for a formal agreement to be set up.

The estate is under the inheritance tax threshold & parent is in their 90s.

In which case can't you encourage them not to gift now? It's got limited benefit for saving IHT and risks leaving them exposed if they do need care fees funded. Also would risk more falling out after death if split ends up being unequal.

Sibling should pay legal fees though. Not your dp.

but you have to pay tax on money that is gifted if the person dies within 7 years which seems quite likely)

ZenNudist - I would prefer the money not to be gifted but it isn't my decision. I was just exploring ways of making sure the loan was repaid from sibling's inheritance as per parent's wishes.

If you can sort this out, do. An aunt borrowed from my grandad in this way, but it wasn't written down and he died fairly soon after, before his will was changed. So what was left was split to include the sister who had already had her 'share'.

we'll skip over the blackmail bit and the not attending the funeral bit shall we?

Jenijena - this is exactly what would happen in this case which is why I am trying to formalise the arrangement.

The elderly parent makes a loan to the sibling - simple to draw up. On death, the estate is, say £100k. That is made up of £60k cash and £40k owed by sibling. The 50:50 share means that 'you' get £50k cash, the sibling gets £10k cash and repays the loan with the sibling share (they have already had)

Thanks caroldecker, that is the type of solution that I was hoping existed.

The other option is to make a codicil declaring that the prior gifts are taken into account ( a "hotchpotch" clause).

I mean Hotchpotch