Using child’s inheritance to get on property ladder

[Wanttobeontheladder]

We are in our late 30’s with 3 children and have been renting all our adult lives

We are desperate to get on the property ladder but I am SAHP and DH is sole earner.

After the loss of a parent recently there is a considerable inheritance that was left directly between our children rather than coming to us.

Using this money would mean we could finally get on the property ladder (just)

Seeing as the children benefit too we feel that we should use it.

Would we be unreasonable to consider this?

You haven’t answered how you intend to repay this money in 14 years

Also, I wouldn't name the children as owners on a property because you'll fuck up their chances of any first time buyer deals/offers/benefits that may be available then.

I know someone that can't do help-to-buy and get on the ladder as their parent put a property in their name as a child.

You've still not said how you plan to give the kids their inheritance? Will you save the money up or sell the house to give them what is due to them

I know 1 person who this happened to, their parents used the childs inheritance to buy a house, when they grew up and was buying their own house, they asked about the inheritance. They were told the money was tied up in the house so they couldn't have it. Needless to say, the relationship with their parents isn't great now.

@Wanttobeontheladder

It's not legal!!!!! It is not your money. You will be stopped from doing this at least, but you really shouldn't even think about it.

I'd buy the house, and then invest the £300 I'd be saving every month into a Child's ISA, £100 per child. It wouldn't take till they're 18 for you to save up the £8,333 you'd owe each of them, plus a tidy sum on top.

Nyon- based on mortgage lending multiple criteria my DH’s earnings are not enough with a £45k deposit to buy a house even moving an hour away

Cheapest houses to buy in our current town are £350k, we are relocating as far as commutable which gets us into £280k houses but the deposit isn’t enough to get there

You can't just "do it" and then repay it to the DC into ISAs, because the money itself is (should be) held in a trust.

The trustee needs to agree the purpose and release the £25K. Then that needs to be documented.

At that point, you need to declare to the mortgage company that the £25K is a loan and the DC have an interest in the house.

It would be altogether simpler if the DC's inheritance could buy a whole house - but as soon as you need a mortgage it gets very difficult, I think.

I'm amazed at so many people saying this might be ok. I've left money to my grandchildren in my will. It's for them, not their parents. The idea that there is any way their parents could steal it from them is shocking and the fact that anyone would consider it is making me question whether I need to take further legal advice.

It isn't your money. Invest it in trust for the DC's and be grateful they'll have it when they're older so you won't have to sub them as much. It's a shame it skipped a generation but unfortunately it did.

We were planning on releasing equity if savings weren’t sufficient to repay the DC inheritance

I’m not too sure how to work out what interest it should be on top but assume this will all get detailed when it goes through solicitors

Presuming the children aren't eligible to inherit the lump sum until they're 18, you have around 15 years to save £25K. If you can commit to the £300 pcm repayments (which, as a PP said, you can't rely on as a saving from moving from rental to mortgage), then you'll have replaced it in under a decade, so should be comfortably able to reach the amount it would have been with interest. In that 15 years your repayments will probably go down, your salaries would presumably increase, and the cash will be accruing interest by itself as long as you're paying it back from the beginning (not much, admittedly).

I'd do it.

Yes it does make a lot of sense in many ways.

However, you would have to factor in to the 'repayment plan' to your children the potential interest they wouold have lost out on, as if not used the money would have been locked away guaranteed for x years, so gaining a not inconsiderable sum of interest.

If you can factor that in - if you can legally use the money to buy a house then guarantee savings of X into the children's accounts until the 25k plus projected interest is paid back, then yes everyone will gain.

I only say this as you are currently renting. Moving to just a bigger house isn't a real gain for the children at all, but their parents owning rather than renting is. This way you could be guaranteeing them an inheritance from you too one day.

BUT - I doubt you could guarantee these things and I doubt it is legal so I would leave it alone. You'll buy your house one day.

Have you been included with in the will? Could you contest the will so the money comes to you?

Failing that I can see good reasons to invest it within your property but only if you can pay it back later.

Skipping generations does seem really pointless.

It'd take just under 7 years to save £25,000 at £300 a month, with just 2% interest.

I’m not too sure how to work out what interest it should be on top but assume this will all get detailed when it goes through solicitors

There's no way of knowing upfront - I suspect legally (and ethically!) you'll have to match whatever interest it would have accrued if it'd been left alone.

So you need to increase income then, either your dh gets a second job or promotion or you go back to work.

NOT YOUR MONEY. I’m really not sure it’s legal and it’s bloody dubious morally.

The fact you’ve squished 3 kids into a 2 bed is all your doing and is not justification for appropriating their inheritance.

Wouldnit work in someway that there is a charge put on the house in the name of DC?

This is obviously questions for our solicitors but wondered if anyone knew so I know what I need to be considering

It would be financially better in the long run to buy property, putting in a bank account will mean the money just depreciates, interest rates are non existent. Speak to a lawyer

Don't see a problem with this at all.

After all, when you die the property will become there's. And will give them a good foundation and.security when they need it most.

Okay...a few things.

It may theoretically be possible, but there are a lot of legal and ethical issues at play. Whether you even could will depend who has been appointed as Trustee for the gift to your children and whether investing in property is within the powers granted in the Will.

It would depend on the terms. If you used it, the trust would own a share and/or interest in the property. You may have issues getting a mortgage when a third party has an interest as well.

It could be as a loan, so you pay it back plus interest. What if you didn't pay? Do you want to put the children in the position where they would evict you and repossess the property if you do not pay them back?

You would be walking a very fine line - as Trustee you have to apply the money for the beneficiaries' best interest. Is their best interest served in lending you the money to buy yourselves a new house or would they get a better return elsewhere. If so, how can you justify it? There are also issues if you are the Trustees of investing with self-interest.

You are wavering a very thin line and short of stealing the money from the children, you may find problems using it anyway (lenders do not like you buying with a loan or non-legal owners having interests in properties they are taking charges over).

At the end of the day, the person who has died can leave their money to who they want and that money belongs to your children. If you decided to have 3 children without sorting out your housing issue or on the assumption that you could inherit then that is your fault.

It's not a crazy idea. It's legal with the right provisions in place. I imagine you'll have to get familiar with the concept of a property being partly held in trust and the property being held as tenants in common with the trust on behalf of your kids. This will be a home for the next 15 years or so only. You should know that you have to sell then or to buy out your kids one by one as they approach the age that they were supposed to get their share. They'll each own about 12% of the future value of your home - whether that is more or less than the value of the home at the time you buy it. Many parents / trustees investing on behalf of young kids would choose the stock market over a high interest savings account - and as we all know, the value of those can go down as well as up. It's not necessarily the best thing to do to stick it in a high interest savings account, just like you wouldn't with a private pension. While you are young, you would invest in higher risk/reward assets and only switch to cash later. It's not crazy, it leads to a better life for the family, but you have to be scrupulously fair with the children and understand up front what that will entail for you all in 15 years time.

It’s not your money therefore shouldn’t be used to benefit yourself unless the property is in the child’s name

Wouldnit work in someway that there is a charge put on the house in the name of DC?

Yes, this is how it would work. But a lot of lenders might not be at all comfortable with that.

And you do need to seriously think through what if you couldn't "release equity" (i.e. get a new mortgage agreement) when the DC were of age, and you didn't want to move...

You need a solid plan to save up to repay them ASAP.

Moving to just a bigger house isn't a real gain for the children at all, but their parents owning rather than renting is.

I disagree with this! At the moment I gather all three children are in one bedroom, and will be indefinitely. If they're anything like my family, the chances of all three of them reaching the age of 18 under those circumstances are slim - it could be a question of life or death