Offering a Bridging Loan to a relative.

[Northern Guy]

My wife and I will soon begin selling her mother's home, with Power of Attorney, with a view to moving her into Sheltered Housing, the latter being the sort you must buy, along with paying a monthly fee for services. The mother owns 50% of her home, the rest being a life interest trust from her deceased husband's estate. At sale, the late husband's children will inherit their 50%, the mother will get her 50% for the new property. Together with her savings, this is enough to buy the new Sheltered Housing, although her savings alone would not be sufficient.

The Estate Agent tells us that the time from marketing her home to completion could be 6 months, whereas we know that vacancies in the Sheltered Housing we are waiting for could appear suddenly; a resident dies or moves into Nursing Home care etc. At that point the family of the Sheltered Housing ex-resident may may want to sell quickly, as they will still have to pay the services charge (over £500 pcm) until sold. We are concerned that we might lose the opportunity to buy the Sheltered Housing due to the 6 months taken to sell the mother's home.

The mother is 84 years old. It occurred to my wife and I that we might be able to offer this elderly lady a Bridging Loan drawn from our own savings. This would allow her to, combined with her own savings, buy the Sheltered Housing as soon as available and move straight to it, something of extra benefit as her health is declining and living alone is challenging for her.

My question is how might a solicitor draw up such a bridging loan agreement from my wife & I to her mother, to be repaid as soon as her own home was sold? A number of scenarios would need to be covered, such that my wife & I would be 'first in the queue' for repayment, if say her mother died at some point before her home was sold, after exchange of contracts but before completion, or if she had to at some point move into Residential/Nursing Home care and the local council sought to take her assets and any home she held before/after completion on the Sheltered Housing. How might our bridging loan be best protected against these different scenarios?

[Pezza54]

Hi
You can either ask and pay for a solicitor to draft the loan agreement or
use the free template at www.lawdepot.co.uk to draft the loan agreement by answering the set questions online
At the end of the process the user is provided the chance to add additional clauses which you could draft to cover the possible events stated in your thread

[atticus]

A solicitor might draw up such a document using his or her skill and experience, having listened to his or her client to ascertain requirements and objectives, and having given his or her advice. This would include ways of protecting you that are appropriate to the situation as discussed.

[Northern Guy]

Thanks both. I was intending to use the same solicitor who I will employ for the conveyances (sell/buy) and also distribute the half share to the late husband's kids. From your answers, do I take it that our bridging loan can be thoroughly against the risks I mentioned?

Separately, will that solicitor giving the half share to those children upon sale, treat this as Probate? Probate was never applied for when the husband died as all accounts were held in joint names, there was little to do at that time. Is the conveyancing solicitor likely to say we must pay them to apply for Probate to distribute that half share upon sale?

[atticus]

Why?

[Pezza54]

Much depends on the terms in your late father-in-law's will regarding the trust and life interest. I am sure the solicitor will study the will and advise you

The trustees names should have been added to the deeds as trustees and are responsible for the upkeep of the property for the benefit of the future beneficiaries

The trustees may be responsible for paying any CGT on behalf of the beneficiaries when the property is sold

[Pezza54]

Provided a formal loan agreement is drafted and signed by both parties then if your mother-in-law passes before the property is sold, the executor named in her will must deduct the value of loans from her estate and ensure creditors are paid before beneficiaries
A copy of the loan agreement should be included in the estate accounts for beneficiaries to view if they ask to see the accounts

[Northern Guy]

PEZZA54 - Yes the deceased husband's Will was drawn up by a solicitor and appointed three people as Executors & Trustees, with the obligations to keep the property in good repair etc. Those three are the Mother, the Daughter (soon to have Power of Attorney over the mother) and one of the children who will inherit his house when the three agree the mother is no longer living there, the mother having the right to remain there until then. Does that mean Probate will need to be obtained for the conveyancing solicitor to distribute the late husband's half to his children?

I assume that her daughter as Attorney can sign the loan agreement on the mother's behalf, making it a bill of the estate before other creditors are paid? Does the same apply if the mother is forced to go into residential home type care at any stage in the process, i.e. as soon as her home is sold the bridging loan would be repayable before local authority means testing could start draining her finances?

[Pezza54]

The LA should take the loan your MIL received into account when carrying out a means test

In your first post you said the children will inherit their father's half share of the house
In your last post you stated one of his children will inherit his house when the mother moves out
This is confusing. Will the child who "inherits" the house be buying the mother's half share so your loan can be repaid?

Your MIL owning the house and living there as a tenant in common has a right (which would pass to the LPA) to sell the house
I may be wrong atticus but I believe with MIL and the trustees agreement form TR1 could be used and probate not required (although there is no time limit for probate) for FIL

[atticus]

your solicitor can advise on the process as a whole.

[Northern Guy]

I said in my later post 'one of the children who will inherit his house' because their are two surviving children who will inherit the late husband's half, but only one of them is an executor & trustee under the late husband's Will.

I'll await your opinions on whether Probate is required with interest.

[Northern Guy]

Just an update on this. I approached a local solicitor, considered the best by the Estate Agent, asking them to handle the sale of the property under power of attorney, and possibly a bridging load (if required). That firm's website advertises Wills, Probate, LPA's and Residential Conveyancing. But they have declined to take the work, saying they no longer have a Wills, Power of Attorney and Probate department which would be required to properly handle the job.

I thought these fields would be very common in non-commercial local law firms, and indeed they still offer these services on their website whilst saying they don't have such a department. Am I missing something?

[Pezza54]

Probate is not required if the property is sold before your MIL passes
Does your MIL have the mental capacity to understand her move to sheltered housing and is agreeable to this?
If she has mental capacity to sign a LPA form, and you are unable to find another local solicitor, your wife could complete the form and present it to your MIL to read and sign
If she loses mental capacity your wife should register the form with CoP. LPA will give your wife the authority to sell the property and sort out her mother's finances
Companies frequently take time to update their websites. This may be the case with the solicitor you mentioned, after losing staff that dealt with probate, LPA

[PallasAthena]

I thought these fields would be very common in non-commercial local law firms, and indeed they still offer these services on their website whilst saying they don't have such a department. Am I missing something?

When I last looked for local solicitors with someone who specialised in wills, trusts and probate most didn't have a specialist so I am not surprised at what you found.

Bear in mind that when a local firm says it has a "Wills, Power of Attorney and Probate department" it probably means one solicitor who specialises in that area of law. So if they leave and the firm either can't replace them or decides that there isn't enough business for a specialist that's the end of the "department".

Out of date websites are commonplace! I don't think you missing anything.

[Northern Guy]

Thanks for these two replies. I hadn't thought that they might simply have lost the staff member doing Wills & Probate, but it makes sense. Perhaps they wouldn't rush to take that area from their website if hopeful of replacing them.

The MiL did sign a LPA whilst with mental capacity, but has since lost it. Unless there was some remarkable recovery, unlikely, I cannot see her being seen as competent to take any part in the sale or any purchase, even to meaningfully consent. Anything agreed today might be completely forgotten by her tomorrow. She has little awareness of where she is, often thinking her home is not her home at all. For this reason we are becoming less sure if buying into sheltered can still happen, as these few weeks since originally posting have passed; she may now need a care home. But we will still need to sell regardless, and I am hoping we can use the LPA to do so.

I'm now starting with a solicitor who can cover these areas. They have said that Probate will be required over the half of the house held in trust from the late husband's Will. That's a disappointment as it will certainly add cost, if not time too, unless they can apply for Probate at the same time as any marketing/conveyancing proceeds? Given the differing views expressed here, should I have any doubts over their statement that Probate must be obtained to sell? I hope a law firm would not do this needlessly to increase the bill?