Do you want to help without depriving yourself and preserving equity between your heirs? The family loan is a good solution provided you respect the rules. Advice from Revenue to lend to loved ones without taking the risk that the loan will be requalified as a donation by the tax authorities.
Your eldest buys his home, the second goes through a rough patch, don’t hesitate to advance them money. You can help them without being permanently destitute by granting them a loan, with or without interest, provided that you provide for its repayment, because the tax authorities monitor family loans.
He will find out if he is masking a desire to lighten an estate. “If it demonstrates the liberal intention of the lender, the loan will be reclassified as a donation, with the key being the rights to be paid on the donations plus penalties for late payment and the sums thus obtained by the borrower could be taxed as a income”, warns Hélène Ferron-Poloni, lawyer specializing in the defense of individuals. The burden of proof lies with the tax authorities.
It’s up to you to show that this is family assistance, not a disguised donation or a maneuver to reduce the borrower’s IFI . Before embarking on the formalities, ask yourself about the objectives of this aid.
1 – Make sure that the loan is the most suitable formula
To help your loved one, make sure that he can repay you or that you can erase this debt by a donation in good and due form.
You can grant a waiting loan before including this loan in a simple donation or a donation-sharing between your heirs so as to preserve the equity between your children.
The donation-partage also makes it possible to fix the value of the goods given to each other, unlike a simple donation which is reported to the estate. In this case, set a sufficiently distant term and expect moderate repayments.
2 – Respect the reimbursement terms
Make sure returns are traceable. We do not reimburse from hand to hand but with a transfer or a check that leaves a trace on a bank account.
Of course, as a family we can allow ourselves a certain flexibility with late payments if necessary but, in the event of prolonged suspension, it is advisable to establish a new acknowledgment of debt specifying the circumstances and the reasons for this interruption. .
“The debtor must be ready to demonstrate by any means, his intention to repay, his ability to do so and the reasons that have prevented repayment until then,” warns Charly Tournayre, head of heritage engineering at Thesaurus.
3 – Avoid the loan becoming repetitive
For example, do not line up new sums every six months: the loan would then risk being requalified as alimony and therefore taxable income for the borrower.
On the other hand, if your adult child is really in need and you can benefit from a tax exemption for the payment of maintenance between relatives in the direct line (including son-in-law or daughter-in-law or parents-in-law), since the Civil Code provides for this maintenance obligation, pay it, as such (deductibility limited to 5,795 euros per adult child in 2017).
4 – Simplify your life with a zero interest loan
If you expect interest, the borrower must declare it on form no. 2561 (in addition to form no. 2062). And each year, the lender will have to mention it on his tax return, in the section of income from movable capital, and pay the PFU above …
The interest cannot exceed the usury rates set by the Banque de France (currently 5.89% for a cash loan of more than 6,000 euros, 2.83% for a mortgage of less than ten years, 2 85% between ten and twenty years).
The usual reference is the remuneration of the Livret A (0.75%). It is not having provided for interest that will prevent a loan from being reclassified as a donation, it is the absence of repayment.
5 – Complete at least the minimum formalities
Write an acknowledgment of debt in duplicate, duly dated and signed by both parties, each of whom will keep a copy.
You must register the loan with the tax services, when it exceeds 760 euros (even if it is not written), clearly specifying the terms of repayment of the loan and any interest.
The borrower and the lender each complete the Cerfa n° 2062 “Loan contract declaration” form and send it to the personal tax department, at the latest at the same time as their tax return.
If the borrower pays interest, he also completes Form 2561 and the lender must report it on his tax return. An amendment voted within the framework of the finance bill for 2019 puts, as of January 1 , 2020, the exemption under conditions of income tax. Otherwise, the offender would be liable to a fine of 150 euros.
If the debtor borrows from several people, he must also produce a summary of loans (as well as one who grants several loans).
The Civil Code (article 1359) imposes the establishment of a writing beyond 1,500 euros (amount fixed by decree of August 20, 2004). “The act must mention: the amount of the loan in figures and in words, the date of repayment, the schedule specifying the dates and the amount of the maturities, the interest rate or the absence of interest”, recalls who specifies that this deed can take the form of your choice: notarial deed, lawyer’s deed or simple letter signed by both parties (private deed).