Do you let your children borrow money, for example for renovations? If you no longer need this money later, it is possible to cancel the credit. However, it is important to do this correctly. In many cases there is an interest-free loan to build, renovate or buy a house. It is not legally required to put the loan on paper, although it does contribute to the clarity of the agreed agreements.
Remission of the credit
After a while, there is a good chance that you no longer need the money. You can then cancel the loan to your children, which means that your child does not have to pay it back. It is a good idea to put this on paper anyway, to make it clear that borrowing money is over, it has now become a gift. This is also important to the tax authorities, to prevent the children from having to pay inheritance tax on the amount later. In addition, this information on paper can be of value to other children and / or heirs.
Correct cancellation of the loan
Do you let your children borrow money and do you want them to cancel this debt? Then we speak of an indirect donation legally. This means that they are free from formal requirements of article 931 in the Civil Code. Moreover, there is no obligation to register, which means that you enjoy a relatively large degree of freedom. It is possible to cancel a debt through a notary in the Netherlands or Belgium, but it is also sufficient to use two registered letters and a document of evidence. Of course you can link a condition to this, of which a load is a good example.
The famous three years
Bear in mind that the famous three-year period also applies to the cancellation of this type of debt. The period applies just as with a bank or hand shift, so that death during that period can have consequences for the net proceeds for the recipient. In certain cases, the tax authorities will still have to go to collect the inheritance tax. Do you want to lend money to your children and possibly cancel this in the long term? Then it is advisable to put that down on paper now, in order to be able to avoid problems in the future.