To ask for help with financial pickle

[ShoebillStork]

In 2009 FIL had a win on the Premium Bonds. He gave us £10,000 to invest for DS (at low risk) and the money to be given to DS when he's 18.

I put the money towards a loft conversion. DS is 18 soon and I'm due to remortgage for a better rate. How much do I need to release for him so he gets the £10k plus what it might have gained in interest since 2009.

And should I encourage DS to get a Help to Buy ISA with it?

Nah, the pickle is that your FiL is likely to agree with us not you, so you don't want him to find out what you did

Nah

The 'pickle' was clearly how to calculate the amount required. It is literally what the first post refers to. All the rest is conjecture and the usual sanctimonious bull crap.

So for eg if you'd put it in Vanguard life strategy 40 (which is low risk in terms of fund types - 40% of your investment is in equities) it would have almost doubled in value over that period. markets.ft.com/data/funds/tearsheet/charts?s=GB00B41F6L43:GBP

@Blossomtoes I would not lie in that situation personally, but there is a risk that FIL agrees with the posters that say DS should have a percentage increase in the house. Most people are saying the 10k plus interest is fine, but it doesn't matter what most posters think. Op said FIL would 'kill her' so I grasp it could be tempting to say it was in an isa all the time to avoid drama.

Wobbly So he would end up 4/5 grand better off.

BUT wouldn't have had his own great bedroom growing up and would have had to share regularly with DSS. We don't know how they get on. But OP implies it is a benefit.

As a mother I know which I would choose for him.

I see this thread's still going strong

What people are disagreeing on is the amount required to satisfy OP's obligation. The posters suggesting a proportion of the increase in property value are simply suggesting that the actual amount returned to DS should be the actual return on his investment. He still got the benefit of the nice bedroom and not sharing, etc, but he should also be entitled to the actual and calculable return on his investment.

OP also benefitted from the larger house etc, and will continue to benefit from that once DS's investment is released. I can't see any justification for OP to profit from his investment beyond that, particularly when DS wasn't given the choice in investing in the first place. The increase in value (in proportion to DS's £10k capital share) is DS's money.

OP perhaps if you're keen to prevent him from splurging/teach the value of investments, explain the situation and ask him if he'd like to release his equity now or allow it to continue to increase in value, and release it at a later date of his choosing?

@vergingontherediculous good post ! That is the dividing line between one camp of posters and the others, I think so too. The thing that matters is what 'camp' FIL would be in. Op has 3 options. Give the actual increase in value. Give 15k and be truthful about the situation but risk FIL agreeing with the percentage increase posters, telling DS he should get more, drama ensues. Or hope FIL does not ask, then lie about a junior isa if he does. Op does not like the first option so it will be one of the second two.

The second of the three options risks FIL telling DS he should get more and OP being faced with a choice of giving the percentage increase she does not want to give or the two of them being unhappy with OP. The third option is the easiest for OP and ensures she will probably only have to give 15k. But it involves lying and consequences if the lie is ever found out. Interesting choices.

I'm a bit bemused as some of the snarking about 'mega-investment plans'. There is nothing sophisticated being suggested.

The straightforward thing to do when getting the money would have been to invest in one of the many investment plans aimed at exactly this market. That's things like Foreign & Colonial, Baillie Gifford, Witan's jump product. These would also have set up the legals for a bare trust ... because, y'know, it's not her money, she's just the trustee. I'd see this as a low risk option over 10 years.

If she'd done this, she'd now be handing over around £30K, and the documentation to show how she invested it, and not needing to hide anything from anyone. If sued or otherwise challenged, it is a defensible investment to have made.

Sticking it in the bank as cash or buying premium bonds would have been daft over the timeframe, but people seem to prefer the certainty of losing money over the possibility of making some.

High risk would have been investing in bitcoin, derivatives, individual shares etc. That's a game I wouldn't want to play with someone else's money. I include property in this, particularly where mortgaged. It's not as safe as people seem to think.

Op said FIL would 'kill her'

And I've said it was a joke (several times!). I rarely see or speak to FIL - as I said he's not my actual FIL and he and DP don't talk any more. I just facilitate his relationship with DS. I used to drop DS off once a month and they'd go for a walk and a burger. Since DS passed his test, he's driven himself and the two of them have had a walk and a beer.

FIL left it up to me how to invest the money to protect the capital and give some return. I did that.

OP perhaps if you're keen to prevent him from splurging/teach the value of investments, explain the situation and ask him if he'd like to release his equity now or allow it to continue to increase in value, and release it at a later date of his choosing?

No. FIL wants it to go to him at 18 and this will be my last re-mortgage so the funds will be released now.

I'll point him in the direction of Vanguard and MSE.

Everyone that's saying that the son should get the percentage increase in the price of the property is correct. It was up to the OP where to invest the money and they chose to invest it in their property so the son is due all of the relevant interest. Failing to do so is the same as saying 'I put it in a savings account but now want to give them less than the interest I recieved'.

I rarely see or speak to FIL - as I said he's not my actual FIL and he and DP don't talk any more.

And this is the person whose gift to your DS you borrowed to spend on your house? (Sorry, I mean invested to protect the capital ) That's what I call a pickle all right.

This thread just keeps on giving.

What @Slippy78 said...

It seems a bit underhand to keep money you’ve earned off someone else’s investment.

One thing that you might need to reasure FIL about if you are going to take the option which involves telling the truth about how your house increase is how you will deal with death or a split. Essentially if you say the house will go to DS he might want to know how the house would be protected if for example DP passed away or if you split and you met a new partner who wanted to marry or who wanted you both to sell the house and buy one together. There is a case in my family where someone was married to a distant relative for two years. That two year marriage saw the stepmother walk off with half of a valuable house despite owning one from a previous marriage.

Actually @WobblyLondoner don't you think the 20% vanguard equity fund is low risk?

40% equity is moderate not low!

@WobblyLondoner the vanguard funds didn't start as far back as OP needs!

@Sadiecow

The original request was explicitly stated as premium bonds

Was it???

Ah you're right, that was FIL investment. Still, it doesn't change the sense of the point. OP could have invested in a savings option that lost money, one that gained 0.5% interest, one that gained 40% interest, one that tripled the overall value... Whatever OP might have done can't be calculated, because she didn't do it. The only return on investment that can be calculated with integrity is the return on the investment she actually made, the house extension.

Essentially if you say the house will go to DS he might want to know how the house would be protected if for example DP passed away or if you split and you met a new partner who wanted to marry or who wanted you both to sell the house and buy one together

Jesus wept!
I'm not married! The house is all mine! I'm not going to marry a new partner!

I don't answer to FIL. He could have invested the fucking money himself if he was that bothered!

Right ... I've reached peak bonkers on MN so I'm going to bow out and leave you to argue about how much of my house I should re-mortgage for my son (spoiler alert: it's £15k)

Sticking it in the bank as cash or buying premium bonds would have been daft over the timeframe but would, by the sound of it, been exactly what the grandfather would have done.

One thing that you might need to reasure FIL about if you are going to take the option which involves telling the truth about how your house increase is how you will deal with death or a split. Essentially if you say the house will go to DS he might want to know how the house would be protected if for example DP passed away or if you split and you met a new partner who wanted to marry or who wanted you both to sell the house and buy one together. There is a case in my family where someone was married to a distant relative for two years. That two year marriage saw the stepmother walk off with half of a valuable house despite owning one from a previous marriage.

If Fil was that fucking bothered he should've invested the money for the DS himself!

Jesus fucking Christ it's 10k that could've been invested over 3 years into a JISA! It's not £1,000,000!

@Mrex I think you are correct that the only investment that can be calculated with integrity is the percentage increase in value and I totally see that this would be fair to DS and FIL. However OP may not want to be stuck with a remorgage for more than 15, the lowest amount she is probably able to risk giving DS without his grandfather instantly kicking off. Op may feel that a bank loan for 10k would have cheaper for her.

Ah you're right, that was FIL investment. Still, it doesn't change the sense of the point. OP could have invested in a savings option that lost money, one that gained 0.5% interest, one that gained 40% interest, one that tripled the overall value... Whatever OP might have done can't be calculated, because she didn't do it. The only return on investment that can be calculated with integrity is the return on the investment she actually made, the house extension.

It does show that you haven't got the ability to read and understand a post, so the level of "calculation" you've drivelled on about is totally irrelevant! You're not that bright really!

40% interest

What's the fuck is a savings option??!

Op you sound wonderful! Thanks for this amazing thread, I would have done exactly the same 😁