We are all free to lend or give our money away if that’s what we want to do with it. However, if we don’t do it in a safe and secure way there is a very real risk that it will cost us or the recipients dearly in the future.
A recent court case should act as a cautionary tale for family members wanting to financially assist their relatives to ensure that any loans are carefully documented. The case centred around a little known legal principle known as the Presumption of Advancement, which places special emphasis on certain relationships, such as between spouses or parents and children. In these circumstances, it is presumed that a transfer of physical or monetary property between the parties is a gift rather than a loan unless evidence to the contrary exists.
In this particular case, a grieving mother lost her appeal to reclaim money from her deceased son’s estate after he used a loan from her to help purchase his first home. In 2005, the claimant’s son borrowed £170,000 to purchase a property worth £360,000. In the time since the loan, the son married with the entirety of his estate being left to his wife and a number of named charities. In 2010, the son received a diagnosed for an aggressive form of cancer, mesothelioma, passing away in 2016.
Following the original diagnosis, he was awarded £350,000 in compensation. It was also documented that £90,000 of the money was repaid to the mother and claimant in the case. In June last year, the mother made a claim upon the estate for the outstanding loan has she had not been provided for in the deceased’s Will.
However, the mother was unable to prove the original money was a loan and not a gift to her son, and the first judge found that the claimant had failed to prove the £90,000 was a repayment of the original loan. Ruling against the mother, the judge ruled that the Presumption of Advancement applied. The initial ruling was appealed in December 2019, but The Court of Appeal’s consequently upheld the June decision because of the lack of evidence suggesting the money was a loan which would override the Presumption of Advancement.
The case highlights the need to show clear intent when gifting or loaning money to loved ones, especially when contentious Probate disputes have risen by 62% year on year. There are practical ways to achieve this that will protect you and your loved ones.
Our team of financial advisers are always happy to discuss the best plan of action for you and your family so please just get in touch.
Redwood Financial is one of the south’s leading Investments, Pensions, Wills, Trusts & Estate Planning providers and we are dedicated to helping families to grow, protect and enjoy their wealth. With our unrivalled knowledge of Estate Planning, Lasting Powers of Attorney, Probate, Pensions, Savings & Investments, we can advise on any situation.