Financing problem - mother temporarily waives her share

Hello,

my partner and I would like to buy grandma's house, which is currently owned by the community of heirs consisting of aunt, uncle, and mom.

Your mom does not need her share, but she cannot give it to us as a gift either. She is well secured, but you never know what will happen in the future. So she would waive it to us, but wants to have a clause entered into the purchase contract that then constitutes a family loan.

Of course, she could gift the money to my partner, since up to €400,000 are tax-free, but if she needs money in an emergency, we can only gift her €20,000 in return, otherwise gift tax applies.

Also, such a family loan naturally does not look good at the bank.

Does anyone have experience in this area and perhaps knows tricks and loopholes or a good way to make this solvable?

Best regards and many thanks

Of course, a family loan doesn’t look good at the bank.

Why shouldn’t it look good? As a rule, the bank will take the first rank in the land register and should offer top interest rates.
The family loan then remains, for example, interest-free and without repayment for the first 5/10 years. Possibly even without interest.

If the mother does not need the money, she will eventually gift you the repayment.
It becomes more interesting if the mother urgently needs the money. Does she then need it all at once or in installments?
In installments, only the income has to be adequate. If she needs it all at once, you would have to take out an additional loan in second rank.

With regard to possible inheritance disputes, one should perhaps still consult a corresponding lawyer.
In addition, it should be taken into account who acquires which shares in the house, who receives the money as a gift (keyword gift tax), and how the whole thing looks in the case of a separation.
From a gift tax perspective, it would probably be more sensible if the family loan is in your partner’s name. However, if you are both registered 50:50 in the land register and take out the bank loan jointly, she would have the majority of the debt in case of separation.

The family loan then remains, for example, interest-free for the first 5/10 years. Possibly even the whole thing without interest.

If official, then without interest you have the issue that the tax office might assume it is a gift. And that could perhaps become a problem in the event of death/inheritance. Therefore, consult a lawyer/notary.

Hello

As I understand it, it looks like this:
House, which belongs one-third each to the aunt, the uncle, and the mother (community of heirs)

That means you would take over 2/3 of the house (pay out aunt + uncle) since the mother cannot gift it, then she would register a loan for 1/3

Assuming the value is €450,000, thus €300,000 would flow to the aunt/uncle
The €150,000 for the mother does not have to be paid, but a loan would be registered, or rather a debt

You would then finance €300,000 without equity, and the mother would be registered in a subordinate position. (either with the value (€) or rather 1/3 of the house)
For the bank it would not matter, as it is ranked behind the bank (it is important to arrange it this way, if not, then 99% of banks are out of the financing!)

The mother had to agree that the bank has priority.

It is best to discuss this with the notary, who can then structure the contractual situation so that the mother has security and you still get good interest.

You can also make the "loan" interest-free. However, it should be clear to the mother that, for example, a 40k interest-free loan will no longer have a 40k present value after 5 years when repaid. Inflation takes care of everything :)

Of course she could gift the money to my partner, since up to €400,000 is exempt, but if she needs money in an emergency, we can only gift her €20,000 in return, otherwise gift tax would be incurred.

If the mother needs money in an emergency to cover her living expenses, it does not necessarily have to be a gift subject to gift tax. On the contrary, it may fall under extraordinary burdens and can even be deducted from taxes. Of course, the time gap between transferring her share of the house and your support should be sufficiently large...

Research "maintenance" in connection with "gift tax".