The loan arranger

02 November 2010

Issue: 4279 / Categories: Forum & Feedback

A 67-year-old client receives monthly payments of £2,500 from his son to supplement his small state pension. The father’s estate is worth about £685,000

Since 2008 our 67-year-old divorced client has received £2 500 each month from his son (carefully documented and now accumulated to £75 000) to part-finance his cost of living as our client only receives a small private pension in addition to his state pension income.

Our client has two properties with loans secured on them and his net estate is say £685 000. We should also mention that although he is not married he does have a long-term ‘significant other’ partner.

What are the key elements that should be stated in the loan agreement between father and son to ensure that the loans from the son to his father are recognised as a deduction in the calculation of our client’s estate for inheritance tax purposes?

Also should the loan agreement be formalised as a deed executed between the parties?

We would appreciate readers’ thoughts.

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