Was it a gift or was it a loan?
The reader’s mother had £31,000 remaining on her mortgage. She lives with her partner - they're not married. Her partner has paid the mortgage off and requested that should either party die, the £31,000 he has paid off be reimbursed to his family from mother's estate. The partner has requested a letter from the reader to confirm they will pay back the money from mother’s estate when she dies. The reader doesn't have an issue with this , but asks if there are any pitfalls they should be wary of and how to word the letter?
Jim comments that:
If your mother and her partner have agreed that he'll be reimbursed from your mother's estate, then this is effectively a loan from partner to mother repayable on death. In his own interests, he shouldn't seek a letter from you as your mother could conceivably change her will at any time and there's no guarantee that you will inherit."
Rather, he and your mother should evidence the loan in writing confirming that repayment will not be sought til after your mother's death. This makes your mother's 'estate' liable to repay the debt, regardless of who inherits under your mother's will or on intestacy.
Jim then goes onto explain that whilst clear 'evidence' of the loan is key, it doesn't mean that you'll need a 20 page legal document. A letter signed by mother and partner confirming the loan amount and the agreement to defer payment til your mothers death should properly suffice. However, Jim states it might be worth the modest expense in legal fees to have something formally (but briefly) drawn up professionally with the solicitor also able to address and explain any lingering concerns or questions on legal effect and mechanics of repayment.
This article was first featured in June's 2020 issue of Moneywise.
For more information on the issues raised in this news piece, please contact a member of our private client team.
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