Loan to Daughters

[zyxwvu]

I have put this on the Law section, but would be interested to have your thoughts too.
We are thinking of giving our 2 adult daughters money to put towards houses (wouldn't it be nice to be able to afford to buy them both nice family homes near us).
We own our house, have a works pension which we live on, state pensions which we keep for unexpected items, and are thinking of giving away half of our savings.
We intend to make this a loan for 2 reasons:
1. To safeguard ourselves in case, in the future, we need the income the
sum would have given us.
2. So that, if they should be in a relationship that breaks down, it is clear that this money is not available to be shared with the departing partner.
1. is unlikely, and if we did need some cash it would only be the income not the capital.
2. well who can say. One daughter is happily married (as far as I know). The other is living at home at the moment.

I thought I would write an agreement, for them both to sign, 3 copies so that we each had one, detailing who had what, and when. My first thought is something like �
"This money is lent interest free but is repayable on demand (1 month notice).If more than 5% of the loan is needed in any year then 3 months notice would be given".

Do you think that would do what I want, and be fair?
Anything else I should think about?
Are they protected against me going gaga and behaving irrationally? I assume that since it is an unsecured loan we would have to take them to court to enforce the agreement, but we trust each other. I'd just like thimgs in writing at the outset, so that we know where we are.

[Dassie]

If the loan is repayable on demand etc then what happens if they have put this towards a house. Do you really want them to have to sell their houses?
Why not stipulate when they are ready to buy their respective houses that your Loan comprises x % of the purchase price and correspondingly have the deed endorsed as such. You then retain your money, your daughter's have a house to live in, any departing partner doesn't have a say in that portion and then you can stipulate in your Will that the % house is now left to them. Also if you fall on hard times and need some extra cash you can stipulate that ONLY in that event they must pay you interest/repay the loan, otherwise it's theirs.

[themas]

Is inheritance tax an issue for you? If it is a loan, then it is still part of your estate for this, even if you leave it to the daughters in your will. If you give them the money and survive 7 years, then it is not part of your estate. However, I understand your reasons in trying to ensure the money is kept away from any ex-partners.

I suggest it might be best to pay out a bit of money and get an agreement drawn up by a solicitor.

[kobe]

I intend to give each of my two children �5k for a down payment for their first time mortgages I have told them that the best way to use this money is to speculate in the property market and buy and sell a few homes without getting attatched for profit until they have financial security and experience of mortgages themselves then they can buy a home for themselves - they are welcome to continue living with me until this point if they need to - say the house isn't livable etc - the main points of this excersise apart from obviously helping them is for them to gain good credit rating and financial independence - when they sell of profit the deal is they repay me the original �5k without interest - I would expect this back within two years - we will simply have a familly agreement ( written ) and will be between my husband and I and each child ( Only ) I think this seems much simpler that your way