# Family Loan



## pumpkin (28 Jan 2013)

My husband's family have gifted us money to buy our family home, very generous. For tax reasons they would like this to be officially a loan, and this is recored in writing. Does this being a loan have any implications for the future? For example, in the unlikely event of a family dispute etc, could they then come back and say they want to persue us for the cost of the house?


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## WizardDr (28 Jan 2013)

There are a number of issues with this:

1. Can you say how much approx?
2. From whom to whom?
3. Likely future gifts / inherirances
4. What did you tell the Bank?

If I was executor in the case of a will and this was included in the paper .. what would you think I would be likely to do? 

Give us some information and I will do my best.


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## pumpkin (28 Jan 2013)

The amount is large, above 500thou but below the 1m mark. The bank are not involved as the the "gift/loan" was enough to buy the property outright. The hard part here for me is that the gift/loan was from my Father in law to my husband and the details of this being a loan as opposed to a gift were not made known to me until after the paper was signed, the hosue bought and we living in it. The house is in my husband's name only and I have concerns about what might become of me and my kids should anything happen to him or indeed in the unlikely event of a marital seperation.


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## WizardDr (29 Jan 2013)

@Pumpkin 

I have to read a litttle between the lines here.

First - I am assuming the transaction was between your beloved and his family.

Second if this had been a gift, then your husband was way above the threshold from Parent to child assuming it was a parent. That would mean a fairly substantial Capital Acquisitions Tax Bill. [So hold your horses!]

Third it may have been the intentions of the parties that they knew the implications of a gift and were treating it as a loan but didn't sort out paperwork.

Fourth this may or may not be secured on the house - it does not sound like it was.

Fifth assuming it was not secured, then under the Family Law Protection Act the non-owning spouse is protected in so far as the owning spouse cannot get a loan secured on the property without your consent.

So before you bring any house down establish the facts.

It may be that the Parent is elderly and has a truck load of assets and when they die your husband may be inheriting a bit more - sounds like he will unless the Parent alreday sold off the furniture etc - your get my gist?


So it may well be in your interests that this indeed is a loan - our erstwhile young buck that watches the Revenue @Mandletrot may suggest that if it were a gift, when did it happen and if it was some time ago your husband could have an issue on the lack of declaration of the Gift etc.

It may also be that the loan was given prior to you marrying your husband ..

so all in all we are still missing some crucual information - such as dates - your star sign and your volatility level 

I think you now have a better base for a rational discussion with your beloved.

Does that help?


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## Bronte (29 Jan 2013)

pumpkin said:


> The hard part here for me is that the gift/loan was from my Father in law to my husband and the details of this being a loan as opposed to a gift were not made known to me until after the paper was signed, the hosue bought and we living in it.


 
From what you've posted it shoulds like this is tax evasion.  Pretending a gift is a loan is definitely what it sounds like.  

Not sure how revenue would catch your husband out though.  That's something you could discuss with an accountant.  Surely with such large sums of money involved your father-in-law and your husband sought professional advice, they must have and that's why this is being classed as a loan, This is the only thing that makes sense. 

I'm wondering what exact difference does it make to you if it's a loan or a gift.  Neither were for you, but for your husband?  Are you worried you will be left nothing if your husband divorced you?  What is it exactly you are worried about?


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## Bateman (29 Jan 2013)

If it's a gift, then gift tax should arise for your husband on any amount over and above his Group A threhold.

If it's a loan, then gift tax should arise in respect of the "free use of property" that arises.  From memory, Revenue's position is that the gift should be calculated on an annual basis with reference to the opportunity cost of the donor not having the funds on deposit (e.g. 3% of the loan per annum or, say, €22,500 per annum on a loan of €750,000).  In such circumstances, it would probably be preferable for your mother in law to loan €187,500 to your husband and €187,500 to you and for your father in law to loan €187,500 to your husband and €187,500 to you.  That way, you're maximising the value of the small gift exemption of €3,000 (essentially anyone can gift anyone €3,000 per annum with no gift tax arising).  At least that way €12,000 of the deemed gift would be tax exempt each year with the remaining €10,500 eating into your thresholds.

There's also a "dwelling house exemption" which might be useful in your family's circumstances.

I'd strongly recommend that your all seek professional advice regarding these arrangements.


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## pumpkin (29 Jan 2013)

Thank you for all your replies. What I am worried about is that I do not have a good relationship with my inlaws and because this is a loan they can pursue my husband/or myself in his abence for the value of the loan. This is a fact I have just confirmed from our solicitor. 

For this reason I believe that I should have been made aware of the arrangement before the house became the family home. The document I saw specifically stated that the loan was for the purpose of purchasing the house and was made just before this purchase. My inlaws are currently attempting to set up a charge againt the value of the property (again behind my back), which as someone has mentioned is not possible without my consent. I have tried time and again to resolve this between my husband and I but he will not even discuss it. I have two small children and I don't work outside the home, I believe that my husband has a duty to make sure that in the event of something happenning to him we are not at risk.


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## Joe_90 (29 Jan 2013)

Bronte said:


> From what you've posted it shoulds like this is tax evasion.



That's a little strong.

His father is entitled to give his son a loan.  As Bateman has suggested there is a deemed gift for the free use of property, although the interest rate may be higher than outlined as it is an unsecured loan. http://www.revenue.ie/en/tax/cat/guide/free-property-loans.html

Did they give your husband the impression that they wanted the money back.  Does have have the capacity to get a mortgage or did he spend above 500thou but below the 1m mark, on the house thinking that they did not want the money back and that he had no tax to pay?


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## WizardDr (29 Jan 2013)

This needs mediation.


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## Bronte (29 Jan 2013)

Joe_90 said:


> That's a little strong.
> 
> .


 
Not in circumstances whereby OP said it was a gift that for tax purposes is a loan, so would imply that it is indeed a gift that doesn't have to be paid back.


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## WizardDr (29 Jan 2013)

@Bronte - I think we actually dont know the facts. Neither does @Pumpkin 
and there is a lack of clarity on dates and intentions .. 

Evasion needs 'intention' (and beyond resonable doubt) and the only intention I can see is that of helping Husband buy the house ..thats all we can conclude ..so far.


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## Bronte (29 Jan 2013)

pumpkin said:


> . What I am worried about is that I do not have a good relationship with my inlaws and because this is a loan they can pursue my husband/or myself in his abence for the value of the loan. This is a fact I have just confirmed from our solicitor.


 
Did you sign a loan document, you stated the loan was only to your husband.  If the house is in his name, he cannot put a mortgage/charge on it without your consent.  Did you solicitor not tell you this?

Your husband does not have a legal obligation to provide for you should he die, he does have a duty but that is another matter.  And if he has the means in the event that you split up he might have to pay you maintenance depending on your income and whether you have custody.  

Pumpkin are you Irish?

To protect family assets, it would be correct for your inlaws to advance the monies to your husband and not you.  I see nothing underhand in that regard to the advancement of money.  

Only issue I see with it, is it a loan or gift.


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## Bronte (29 Jan 2013)

WizardDr;1311552 the only intention I can see is that of helping Husband buy the house ..thats all we can conclude ..so far.[/QUOTE said:
			
		

> Our posts clashed, yes it does look like a family helping their son which is perfectly reasonable. Strange that Pumpkin is confused if she has seen a solicitor.
> 
> And I don't know where you think evasion needs intention beyond reasonable doubt.


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## WizardDr (29 Jan 2013)

@Bronte - if evasion is criminal - the standard is beyond reasonable doubt. If its civil then on the balance of probabilties. I just see that this case is fairly muddled and I could see how a stand off could emerge.

When @Pumpkin mentioned the in-laws I did get a feeling that there may be a prejudice
against her .. and this in fairness could be a manouver to make sure that in the event of a split that she does not get 1/2 the house - it could well be that.

On the other hand it could be a massive misapprehesnion on her part.

The reality maybe somewhere in the middle.


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## pumpkin (29 Jan 2013)

No, I'm not confused, but a gift is a gift and a loan is a loan. I don't see any excuse for my husband to misrepresent or not be clear about which it is, not to me. Especially since his parents have tried to offset this loan against the family home. He's not of course obliged by law to protect me in the event if his death, but by duty, and that's not another issue, it's THE issue. These are things that husband and wife should discuss openly, I just want clarity in these issues. Simple. The solicitor has strongly advised mediation


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## Bateman (29 Jan 2013)

Joe_90 said:


> That's a little strong.
> 
> His father is entitled to give his son a loan. As Bateman has suggested there is a deemed gift for the free use of property, although the interest rate may be higher than outlined as it is an unsecured loan.


 
Yes, I think that when I last looked at this I was arguing that it was a secured mortgage and that a lower rate would apply.

Mediation regarding whether a windfall of €750k is a loan or a gift. Tough life!!!


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## Dr.Debt (29 Jan 2013)

I think you have two issues going on here

1. Trust issues with your husband. Why didnt he explain exactly what was going on "gift" Vs "loan". I suspect his father laid out his own conditions for the gift and the son tried to meet the conditions without upsetting you.

2.Concerns your security regarding the house that you live in.
Your husbands father has used his own funds to purchase the house and clearly doesnt want to see it go out of the immediate family if something were to happen to his son. I can understand that on one level and maybe it would have been more sensible for him not to offer any "gift" in the 1st place.
You have lost nothing. You have free accomodation and there's nothing to stop you from purchasing your own place if you wish to


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## WizardDr (29 Jan 2013)

@Pumkin - its a gift or a loan depending on intention. Not having the paperwork lined up is evidence of neither.

I note I suggested mediation because as I read it - these are never black and white.

I am not saying who is 'right' or who is 'wrong' but I do know there is a fairly large cost one way and maybe not the other.


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## pumpkin (29 Jan 2013)

Dr Debt, ur analysis is helpful. But please I came into the marriage with a good salary and fairly good career prospects. My husband and I decided it wud be best for all of us if I stayed at home with our children. Now after 7 years of marriage it is a difficult situation to face heading into finding a way to get security, which is all I'm after, not just for me, but for my children.


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## WizardDr (29 Jan 2013)

@pumpkin I note you are not listening !


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## pumpkin (29 Jan 2013)

Oh Wizard Dr.  , I am trying but ur posts are cryptic!


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## pumpkin (29 Jan 2013)

Oh WizardDr, I'm trying but ur posts are cryptic!


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## pumpkin (29 Jan 2013)

Oh WizardDr, I'm trying but ur posts are cryptic!


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## Importer (29 Jan 2013)

You mentioned that your father in law wishes to put a mortgage on the property now.

Under the 1976, Family Home Protection act, neither your husband or your father in law is able to put a mortgage on the home without your knowledge and consent.

If you feel strongly about security issues you have an option to stop the mortgage being placed on the home.

Without the mortgage in place your husband is the owner of the property
for which he has an unsecured loan from your father in law. 

In the event of a separation or divorce, I cant imagine your husband would be able to remove you from the house at least until your kids were grown up and even then I think he would have to compensate you for the years that you were a stay at home mother..

In the event that your husband died, then I think your father in law would have great difficulty in removing you from the house also. When speaking with your husband about your concerns, you might agree to take out a life assurance policy on your husbands life which would enable you to pay off your husbands "loan" in that type of situation. 

I think your concerns are valid but im not assure that I could advise you to declare all out war because of them.


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## pumpkin (30 Jan 2013)

Great replies and thanks to everyone for your imput. I am in discussions with my husband at the minute which is a huge relief. What scared me most about the whole thing was the secrecy. Obviously my father in law wants to protect a huge investment but up front and honest about your intentions is the only way to go with these things I really think.


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## Bronte (30 Jan 2013)

pumpkin said:


> . But please I came into the marriage with a good salary and fairly good career prospects. My husband and I decided it wud be best for all of us if I stayed at home with our children. Now after 7 years of marriage it is a difficult situation to face heading into finding a way to get security, which is all I'm after, not just for me, but for my children.


 
What was the agreement in relation to security when you gave up your job? 

Your husband has provided a home and it must be a fine one if it costs 750K. The fact he didn't have to borrow this money means there is more of his salary to spend on the family.  There are some of the thinks that must be considered when one is making large financial transactions.  And there is nothing wrong with your father in law protecting the 750K.

The original idea may have been for the father in law to 'gift' this money to his son, but after taking legal advice it was decided that financially it might be wiser to 'loan' it. In addition legal advice to protect this money and keep it within your husband's family was to not include you in this. 

What is it you would like now? 

There are a lot of other ramifications to you having given up your job. For examply you have no income of your own, you have to rely on someone else for income. You are presumable not contributing to a pension, though the Irish state will allow some time at home with children to count towards your contributions. These are very important things you ought to think about. Even if your husband had bought the house outright, it would not mean that you had necessarily any more security than you do now. A mortgaged home has not much value, and a home to which one does not contribute financially is unlikely to be given to you in the event of a marriage split. You might get to stay in it until your children are 18 if you get custody.

It is very good that you are talking to your husband. Don't make your negativity to your inlaws put a wedge between you. I agree that between a married couple everything should be open and honest.


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## dereko1969 (4 Feb 2013)

You keep on saying "my children" are they not "our children"? Is your husband the father of the children?


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## 44brendan (4 Feb 2013)

To a large extent a lot of the supplementary discussion is irrelevant and immaterial. Both Dr Wizard and Importer have given a satisfactory response to OP's concerns in respect of the PDH. If she has further concerns, she should seek the advice of a solicitor.


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