Would you take money from your mum in this situation?

(60 Posts)
RevoltingPeasant Sat 17-Nov-12 17:23:31

I am really genuinely torn on this one.

So: my mum and dad split up 4-5 years ago, DM is in her mid-60s, owns her house outright, has comfortable savings and runs her own (small, 1-person) business. Recently she put her house in trust to me and the DSisses because she says she intends to leave us the property eventually and she doesn't want us to have to pay inheritance tax. I felt pretty uncomfortable about this as it seemed like anticipating her death but I also saw it was a sensible, kind thing for her to do.

DH and I are saving for a house. I trained a long time to do what I do and I will be 34/35 before we can afford one, even on about a 90% mortgage. We also want to start ttc in the new year. But I am worried about having a baby without being close to our savings target as I think we would be unable to save much with DC here.

So my mum said recently, do I want to 'anticipate' my eventual inheritance by having her cash in some money on her house to put towards our deposit? I said no but I know this will come up again when we go for Christmas next month and I don't know what to say.

AIBU to say yes to make my life easier, or should I stand on my own two feet and delay house-buying & baby-making?

cozietoesie Sat 17-Nov-12 17:50:04

Me also, actually, so I'm biased I guess. I borrowed some money from my Mum when we were in difficulty and paid it all back including interest. (Which, sadly for her, was indeed peanuts.)

Numberlock Sat 17-Nov-12 17:54:17

First thing to consider is how much savings would she be left with in the event that she needs nursing care at some stage in the future.

Tabliope Sat 17-Nov-12 18:03:27

I'm in the situation where my brother has had a leg up for quite a substantial sum from my mother. He didn't need it - tiny mortgage about a quarter of mine. I'm completely pissed off about it and am thinking of not having anything to do with either of them as it highlights inequalities that I feel have been ongoing since we were small. I don't want the same sum of money even though I could do with it much more than my brother but what I do want is him to pay my mother back so we are on an even footing as that is what I perceive to be fair. I don't think it fair for you to take it. You might need it now but in the future your sisters might need it (redundancy, if one of them needed IVF etc) but can your mother afford to keep freeing up her money for them? How would they feel if they found out? Like me I expect. Pissed off.

RevoltingPeasant Sat 17-Nov-12 18:06:11

So cheery MrsCant. Yeah I know, that is kind of what I feel. I am skittish about having a baby whilst in rented as last year our landlord specifically offered us a 'gentleman's agreement' that we could stay in the house for at least 12 more months - I arranged elective kidney surgery on the back of that - 10 days after my op he gave us a chucking-out notice. I had 8 weeks (when I couldn't drive, on painkillers) to find us a new house.

I am worried about that happening if I have a rough birth/ Csection and also just think saving might grind to a halt post-DC.

pascha sorry, how would mum be in debt? She owns her house outright and has quite a lot in savings.

RevoltingPeasant Sat 17-Nov-12 18:09:29

Sorry MrsCant that should've had a smile in there, was not meant to be narky!!!

Numberlock I do not know her situation with savings but I think she has about £200k. She is currently living off pension + her business + some interest from that and not touching the capital. I think.

But Tabliope you make a good point. Even if I asked DSisses they might feel obliged to say it was okay out of politeness.

Lavenderhoney Sat 17-Nov-12 18:10:40

Hellhas- that's exactly what I mean! And what my dm said.

Op, maybe your siblings have accepted theirs! What does your mum say? If she has her own business she must be quite switched on, no real debt etc However, look at the amount you can be gifted - you don't want to be liable for tax. It's about 3k ( or it was)

BadgerFace Sat 17-Nov-12 18:12:30

Has your mum taken professional advice? If her Estate is above the IHT Nil Rate Band and she intends to give you and your sister her house in Trust but continues to live there then this is a Gift With Reservation of Benefit and the house will be counted as part of her Estate anyway unless she pays you a market rent. I.e. the gift is not effective for IHT planning purposes.

If she's going to give you cash out of her savings instead of gifting her house then the problem won't occur.

cozietoesie Sat 17-Nov-12 18:14:04

I think Pascha was referring to an equity release plan, OP - if indeed that's not only possible (given the trust) but what your Mum has in mind.

I think you'll find that your DSisses would likely have no problem with a formal loan which you paid back including the going rate of interest. That would keep you all on an even footing now - and would be a charge against your share of any estate in the event of her death.

noddyholder Sat 17-Nov-12 18:15:24

I would say no if she is considering equity release

cozietoesie Sat 17-Nov-12 18:15:49

That's an annual figure, Lavenderhoney and its effect would depend on the date of death.

Maybe you all should seek professional advice, OP.

DontmindifIdo Sat 17-Nov-12 18:21:44

I think there's a few problems here, what if your mum wants to sell in the future? Is she planning on living in the house forever? What if she needs residential care? There are 2 questions that throws up, 1) how will she pay for it and 2) if she can pay another way (or make the house your asset rather than hers and get free care) what will happen to the house - will it sit empty for possibly 10+ years? My grandmother innitally moved in with my parents then went into a home, it was over a decade in total, that's a lot of maintenance costs on a house that noone is using.

If she can give you the money from her savings now, she can change her will to reflect what's already gone ot you, your sister would probably be happy with that. BTW - my brother borrowed £10k of my dad to buy his first home, when he moved 5 years later he paid my dad back - i didn't begrudge it to him, I know if I'd needed similar sums, they'd have done the same for me. It's only a problem when the other sibling doesn't get the same help.

ClippedPhoenix Sat 17-Nov-12 18:22:02

I'd accept OP but seek legal advice on the best way to do this.

My late dad was like your mum in a way he gave me soo much whilst alive because he said what was the point when he was dead and wouldn't be around to see me benefit from it.

Whoknowswhocares Sat 17-Nov-12 18:26:32

No I couldn't. There is no telling what her future holds and whether she may have money to pass on when she dies. Or whether she needs it to provide her some care in the future or well, any number of things.
Just suppose you said yes, took your share then there was none left in the pot for her needs. Or your sisters got less because times changed?
You don't NEED the money. You just want it. Which IMO is not enough of a reason

Tabliope Sat 17-Nov-12 18:29:02

RevoltingPeasant a loan would be better - even at zero percentage interest. Your sisters might say they're ok with it now and indeed they might truly feel that but that might not always be the case, depending on what life throws at them and also you - both positive and negative. Say, for example, they can't have kids or husband made redundant or they have long term health problems and one can't work. They might then think well what about us? On the other hand your fortunes might change - say you win five plus the bonus, just enough to make life comfortable - they then might be thinking hang on, she got that hand out from mum and now the lotto she's well ahead because of all this. It's not fair. It was done to me in a sneaky way also which I can't forgive so if you do it I'd do it above board and make sure everyone knows. Also do it under the advice of a solicitor. It might not be done with the intention of favouring one child but believe me it can end up being perceived as that and if you want a future relationship with your sisters I'd be careful.

AThingInYourLife Sat 17-Nov-12 18:30:50

No, I would not take an "early inheritance" from anyone.

An inheritance is the money left over.

While a person is still alive there is every chance they will need it.

Pascha Sat 17-Nov-12 18:36:39

Yes sorry I was referring to equity release which is a loan in effect. If it's her savings she can do what she likes without penalty but she does need to get the terms of the trust set up correctly to take into account any advance you have on your share.

RevoltingPeasant Sat 17-Nov-12 18:51:53

Oh right, thanks Pascha

Tab I would definitely discuss it with my sisters - no way would I do anything behind anybody's back. Actually my dad's family got all snitty with each other about money and we have all agreed already we will not fall out over money.

DM has taken legal advice: I don't know all the terms of it but her solicitor specialises in wills and reckons that presuming DM doesn't die within 7 years (God, I hate even writing that sad) that IHT will not apply. I don't know all the ins and outs but the solicitor reckons it's sewn up.

With a loan from DM, I sort of feel like, what's the point? - as we are already getting a loan with the mortgage at interest. And I would feel terrible if our circs changed and then we couldn't pay DM back. If that happens with the bank, it's tough shit, an impersonal thing, they foreclose or we sell up or whatever - but if it happened with DM I'd feel terrible.

Yes I take the point about not knowing her future financial needs. Think I will probably not. But thanks all smile

Corygal Sat 17-Nov-12 18:55:20

Agree with everyone who says avoid eq. rel. plans like the plague. They're worse than wonga.com, and that's saying something.

I'd say YES - most people don't go into care, and the quarter of OAPs that do usually live a year at most. If your mum transfers the cash tax-efficiently you will pay a lot less tax on it than if you get it later, trust or no trust, plus the money will grow in value.

Inheritance tax is nasty. One of the things about inheritance that older people feel much more than the young is the awful realisation that unless they give their money away while alive, they are signing a massive cheque to George Osborne. The old don't like it, partic not when they have worked for said money.

Finally, about 75 per cent of new homebuyers get financial help from family. I think MN is rather at odds with RL about this, actually, and traditionally has been. Your DM is offering to do something standard and usual.

WileyRoadRunner Sat 17-Nov-12 19:35:15

Will your DM be able to even get equity out of the house if it is in trust?
I think it is quite complicated, no?

I initially said no as it just sits uncomfortably with me - you are not really in dire financial need. But i get why you and your DM would want to do this.

<squirms on the fence>

However, i am a bit of a hypocrite as my lovely dad pays my daughters school fees blush but only with my deceased mothers pension as he does not want to have the money himself and my brother (who will not be having children) agreed it should be used for the girls.

RuleBritannia Sat 17-Nov-12 19:43:38

I would also disagree with an equity release on the OP's mother's house. In effect, she would be borrowing money on her house based on its value and not paying any back until her death. Not quite sure how it works but I read somewhere that interest is charged on the loan and when the mother dies, the amount to be paid back could, by that time, be more than the house is worth. That would mean that the OP and her sisters might have to stump up the extra.

Chelvis Sat 17-Nov-12 19:54:47

I would go for it, we've found it incredibly hard to save since we had a baby -everything from unexpectedly needing formula/steriliser etc to the cost of restoring the damage our now toddler is causing around the house (the DVD player and some ripped wallpaper this week alone!). If it means Grandchildren sooner and a longer time with them, I'm sure it will make her happy too.

Chelvis Sat 17-Nov-12 19:57:17

RuleBrittania, I don't know much about equity release, but surely someone can't be held responsible for the debts of another person, even if it is their parents? Fair enough for the estate to be responsible, but surely they can't bill the children? I really hope not, I know a few people whose parents/grandparents have done this, it would be a nasty shock!

tripletipple Sat 17-Nov-12 19:57:58

It's her money and if she wants to give it to you that is up to her. My mum has adjusted her will twice to take into account money she has given to me. She wants to treat us all fairly but my brothers just haven't needed the money to date and I have, but she has adjusted our inheritances accordingly.

I can see my brothers querying the figures when it comes to it, but then I live close to her and do so much for her every week - they rarely phone let alone visit.

Let her help you out , she wants to.

calypso2008 Sat 17-Nov-12 20:09:57

I agree totally with athinginyourlife Your DM is only in her 60's - you have no idea what may happen.

Also, don't you want to be responsible for your own life? You are married, you have a job, if you have a baby it is surely up to you to fund this (and it need not be expensive)

My friend did an 'early inheritance' from her Grandma - it ruined, totally her relationship with her brother. I agreed with him, TBH, she had a child, wanted another, he did not have a child and was not married - total entitlement.

Talkinboutmoney Sat 17-Nov-12 20:32:49

Dependent on how much your mum can afford to lend you, the Lloyds Tsb "lend a hand mortgage" could be an Option. See here. Basically it allows you to buy a house with a 5% deposit providing your mum can put a further 20% in a Lloyds Tsb savings account for 3 years. If all goes smoothly after 3 years you will have 10% equity and move onto your own mortgage and your mum will get her money back with albeit minimal interest.

We did this after my parents kindly offered us the deposit for a house. I like that it is legally binding. I am the oldest and although right now my parents could afford to give the same amount of money to my siblings, that might not always be the case. This way I don't have to worry about having to pay them/siblings back should something bad happen. We did make sure we could easily afford the mortgage payments and put extra equity in to do so. Again we were lucky to be able to do so, but the pressure it has taken off trying to save has been enormous. I

Although not for everybody, it has worked/is working very well for us.

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