Inter-family loan - how to protect
Hi folks. I will be hugely grateful for advice on how to deal with this issue please!!
I am in the UK. I want to make a loan to my mother of c. £45k, to buy a (bigger) property.
In the UK, the government can appropriate a person's assets to pay for nursing care in the final years of life (which can be around £25k per annum). As such, I wish of course to ringfence my loan.
I was thinking to make her an interest free, perpetual loan. Firstly in order to avoid being taxed on interest payments, and secondly to avoid ownership and corresponding capital gains tax (CGT) in the event of property price increases.
However, I recognise that the value of £45k in (say) 15 years, at an assumed inflation rate of 4% is £81k. So if I structure as an interest free loan, the real value of the money returned to me in 15 years is significantly below what I have loaned.
Mother is 74 so I expect the estate to be settled in let's say, 15 years, for the sake of argument. With or without my loan, the estate will not exceed the inheritance tax threshold (at it's current level).
As far as I can see my options are to actually receive ownership of the property and accept that I will be taxed on any CGT.
Other options I am unsure of are maybe some sort of trust structure?
Or if I can be a bit sneaky about it, maybe appearing to the authorities to 'lend her £81k'. For example, I could actually lend her £81k, take a charge on the property to that amount, and have her 'gift' me back £6k per annum for the next 7 years (£6k gifting is the max amount of annual gifting at the moment in the UK). I am not sure if I'd run into some constructive avoidance issues doing this. And it's a less favoured option because it's a bit complicated and involves exchanging more money than I'd really like to.
I suppose I could loan her the initial £45k in year 1, then £6k every year for 7 years (taking out another charge each year against the property), with corresponding gifting back to me of £6k per year at the same time to neutralise the exchange. But surely this would look like constructive avoidance?
Well, I hope that's all understandable. And hoping there are some whizzes with the solutions out there!!!? Please help. Thank you kindly,
Be really great to get something that's more helpful (not from ccon!)
Doubt you will find anyone here with knowledge of asset protection in the UK. Go find an attorney and pay for advice you can fall back on.