A client is the attorney under an LPA for his aunt, along with his sister. The LPA is in use, and the aunt has moved into a nursing home. The aunt’s house has been let out to generate rental income to support the nursing home fees. The aunt’s other funds are nearly exhausted and the client has asked whether he can lend funds to the aunt, and subsequently obtain an IHT deduction for the loan. The loan would be interest free. The client and his sister will be the beneficiaries in the aunt’s will, and they will also be her executors.
The client would be the lender in his own name, and the recipient of the loan as one of the attorneys. The information I have located is all about loans going in the other direction not being permitted. Is anyone able to advise whether it is possible to obtain an IHT deduction for such a loan, and how should it be be documented?
Many thanks for your help.
Jane Evans
Jane Evans Taxation Limited
Chartered Accountant and Chartered Tax Adviser, not a lawyer
Would not recommend a loan directly to the Donor as she cannot make a decision and whokst the loan coukd vevin tve ‘best’ interests of the Donor the Attorney would seem to effecting a ‘lien’ on the estate for his own benefit which would go against the main tenants and purpose of the LPA…
Rather than lending funds to the donor which may or may not be permitted, the Attorney should speak to the Local Authority about putting in a place a Deferred Payment Arrangement for the care fees.
This is essentially a charge by the Local Authority against the property for any unpaid/deficit of care fees which then becomes payable either when the property is sold or when the donor dies. This is entirely permitted and would have the desired effect of being a debt of the estate for IHT purposes on the donor’s death.