Borrowing money from parents

[rickyrickygrimes]

Without lots of details, my parents have offered to lend us money to cover the cost of our DCs university studies (we aren’t resident in the UK and they can’t access student loans). We estimate it could be up to £20,000 per year per child.

DC 1 - 3/4 years study, starting Sept 2025
DC2 - 3/4 years study, starting Sept 2028

What’s the best way to make this agreement legal? We would want to start paying them back £500 per month straight away. They don’t want to charge any interest. We haven’t talked about how and when the money would be released, and obviously DC 2 still has several years to go before needing this.

they are currently in their 70s and in good health. I have one sister: we are equal inheritors in their wills, and I wouldn’t want her out of pocket. Potentially paying for care is another issue.

Anyone dealt with this situation? advice and experience welcome,

What are the alternatives?

I mean if you can afford to make £500 repayments you can afford to save £500. By September 2025 you could save £15k towards year 1 and find £12k annually for rest of the time. This leaves your children £21k short for the first child and £24k short for the second. Do they or you have access to that kind of income or borrowing from elsewhere ?

Could they not get jobs, sponsorship, grants or loans to live off.

Otherwise you are looking to borrow at least £120k and pay it back over 10 years +. There are legal issues given your parents age and there are relationship issues in terms of family dynamics and inheritance. The extent of which all depends on how wealthy they are and what you can do if your circumstances changed. I have never heard a case of this not going wrong and the borrowers not defaulting. You must know your parents cannot sue you or take you to court if you can’t pay. You must know there is no guarantee your kids will complete their course.

Your situation isn’t desperate and your children need to make responsible decisions at university and when they start to work recognising neither you or they can afford to anything else.

At the end of the day your parents can do what they want. If I was a sibling I would respect that but I would definitely side eye and your kids for saying yes to this.

Have you considered the impact on inheritance tax?

I agree with pp save as much as you can between now and Sept 2025. Only take the loans year by year as everyone’s circumstances may change.

Do a formal loan agreement and include the fact, if in the sad circumstances both your parents die before it is repaid, your inheritance is reduced by the outstanding amount.

Be aware should one or both of your parents need care and require funding that the loan will be treated as part of their assets.

Make sure your parents are open with your sibling as it’s the secrecy that does the damage. If she has DC will your parents be in a position to offer the same.

Why don't they just deduct the amount from your inheritance?

Thanks all.

we would definitely be open with my sister. she doesn’t have kids (by choice) and as a result our priorities are very different. Plus she’s married to an older, wealthy man, likely to retire early age 52 and will live off his pensions / property in considerable comfort. DH and I, by contrast, married and had kids late, and moved around a lot: he will be approaching retirement age the time DS2 finishes school. My sister is in a position not to need to think about expenses like uni fees, supporting young adult children etc. We are not in the same position. We do have some money put away for this but frankly Brexit rather screwed up our plans 🤦‍♀️.

My parents have always said there’s money available to support the boys. They do have the means: they are just about to sell one of their holiday homes and aren’t sure what they will do with the money 🤷‍♀️ what a problem to have 😂.

At this point deprivation of assets shouldn’t be an issue. They are both in good health and no expectation of needing care at this point.

thank you for the advice, it’s food for thought.