Investing children's inheritance in our family home.

[Youknownorhing]

My Mother left her house split four ways. Myself. 2 siblings and my two children. So 25% for each child and 25% slit equally between GC in trust. They can have when they are 27.

I am a single parent in a house worth £400k. Ex left me with the mortgage and skipped off abroad with OW. He is in Dubai where CM is unenforceable.

My mortgage went from £500 to £1400 in January. I had already put my inheritance into the house to reduce mortgage to £150,000.

The children's share is £167k.
It seems ridiculous that I pay this money for a loan when there is money in a discretionary trust of which I and my best friend are trustees. The money makes bugger all in interest. The sea single thing to do in my eyes is to pay off my mortgage with the children's money . (I would do it via a lawyer so that their percentage of ownership is clearly recognised and recorded at the land registry )

Kids are 11 & 13.

I currently struggle to pay for day to day life for us all now the mortgage has increased . Doing this would free up my salary and allow us to have a few treats and perhaps even a holiday this year - something not on the cards at the moment .

Other trustee is more than happy . Can anyone see any problems doing this ?

Obviously I will have to sell in 15 years or so. But until then it seems a much better way to invest their money which will benefit us all.

The grandma didn’t leave them cash though, it was in the form of a house. If the OP had chosen to buy out her sibling and live in the original house nobody would have minded.

Generally parents leave most of their money in the form of a house / property.
A % or equal share to be divided up in accordance with the will.
One person can buy another out etc etc, of course……but….

In this case a trust is in the will in order to safeguard the inheritance of minors. It will mature when each child turns 27.

OP wants to use the money to pay off her mortgage.
Simple.
Its not OPs decision, that big decision about her childrens money was made already by the deceased and must be followed in Law.

OP, I absolutely get why you are thinking of this. You'll be giving the DC a better standard of living and not having a lone parent stressed out by providing everything on her own.

You can put legal protections in place to protect your DC inheritance and give it to them (with interest) when they hit the age the trust would pay them.

Imagine if they want to get married and/or buy their own homes before they're 27. They won't have access to their money for a wedding or deposit. Being named on a house already will screw them over when it comes to first time buyer mortgages and stamp duty. Their money needs to be accessible to them for when they need it, not locked away until they're 27-years-old.

Well... I would still do it in that situation, so long as I could guarantee that the DC would get their money back by the time they turned 27.

Why are so many people talking about what happens if they want/need it earlier? Want a car? Uni costs etc.

They can't access it until they're 27, and the inheritance was originally a percentage of a property.

OP is the 27 age something you/the trust set? Or something that was requested by the grandparents?

@WideFootWelly because a trust fund is for the benefit of the child. They don't get access to the capital until a set age, but they can benefit from it in the meantime ie university fees, weddings, ballet lessons, house deposits whatever.

It is not for mum to use to drive down her mortgage without paying back both the capital investment and the profit / interest the money could otherwise have earned if it had been properly invested. Add on what the kids could have had if she hadn't tied up the money (university paid for, a car, driving lessons, house deposits, physiotherapy, talking therapy, whatever they need)..... It's a major piece of work to deny the kids that IMO.

That’s not exactly how it works . Money can be accessed for the children benefit before that age .

Why are posters saying it's for the mum to benefit herself? Can people really not see that keeping DC securely in the family home is of immense benefit to the DC in the here and now, and for the entirety of their teenage years?

OP is not planning to steal the money. She is using it to secure their housing and to provide a better standard of living in their teenage years. She can pay interest and they'll get the benefit of the capital increase. All protected legally.

Plus OP is planning to leave her own money to her DC - they'll get even more then!

But the trust could own the property

I would it makes no sense to have a pot of money and be paying high interest on mortgage. Save a decent proportion of what mortgage payment would be into university accounts for the children.

Do you know what an off-set mortgage is?

The money is not being used to pay off the mortgage at all.

You should absolutely do it OP, for the sake of your children. The difference between what the trust earns annually (5k) as opposed to what you pay in mortgage (18k) means that keeping the money in the trust is costing you and your children over a thousand pounds a month!

I would take the money now to pay off the mortgage, use the extra 1k a month to make your children's lives nicer with activities, holidays etc, and then when the interest rates come down (and your credit rating has recovered and you can go with a mainstream lender) take out another mortgage for the same amount and put it back in the trust.

So many stupid responses. Trustee act 2000. Read it before making stupid comments about how op is discharging her duties correctly.

Absolutely not. I wouldn’t even consider factoring in this money when trying to organise my own finances. It isn’t yours , it is your children’s and as a trustee you have a responsibility to make sure that money is easily accessible by the people it is meant for, when they reach the appropriate age. So many things could happen in the next 15 years as well. Just no.

Trustee act 2000 states that trust investment must be suitable for the trust, not the trustee

Exactly this. I’m amazed that so many people are objecting to this. It sounds like a great solution to your current financial hardship and the kids still get their share of their inheritance when they’re 27. They lose nothing but gain a much, much better quality of life in the meantime.

Exactly this. I’m amazed that so many people are objecting to this. It sounds like a great solution to your current financial hardship and the kids still get their share of their inheritance when they’re 27.

People are objecting because there isn't a guarantee that the dc will get the money at 27....

Same Act also states that trustee can buy land for beneficiary to occupy. Don't know whether that applies to the OP's plans. https://www.legislation.gov.uk/ukpga/2000/29/section/8

‘If I were a beneficiary, once I reached 18 I'd be suing you for the money plus interest/returns.’

indeed, this is an entirely possible scenario.
Said children are within their legal rights when adult, or to ask another to act on their behalf, to challenge the trustees - as mentioned above - & in due course if so wish to force the sale of the house to recoup their assets.

It is unwise to tie up other people’s financial interests in the very roof over your head, as OP may have learned already with her Ex. She may repeat the same error of risk assessment again if she ties up her fiscal security with her as yet unknown mindset of the children when adult.

OP’s children are now very young, far too young to have an opinion about what is in their best or preferred interests. Many years are yet to come, including some fierce financial adjustments in the employment & housing markets. I would not like to gamble on the value of current housing stocks in 15 years time.

There is a reason why the Grandmother did not split all her estate equally between her own children, & a rationale why she segmented a good proportion early on for her grandchildren’s benefit in trust with independent trustees.

Why, OP, do you think your mother did that?

Being direct, I think that your mother had a reasonable concern that you are not that financially savvy & easily bluffed/blustered in these matters.

As said by many posters, you have need to separate your own mortgage issues into a more manageable & efficient vehicle by using an independent broker. Then you & your fellow trustee need to act in the children’s best interests to have the considerable sum invested efficiently for capital growth for the next 15 years according to the terms of the trust.

Additionally, you may need to consider such financial vehicles to be ring fenced so that the children’s father has no potential interest. One sniff of spare money & you may find he turns up like the proverbial bad penny. Indeed were your children’s money used by you to ease your current financial mess so making the house more affordable for you, the children’s father may bring pressure to bear on them to gain their assets when they reach the age to force you to sell. Such matters do occur.

Get good financial & legal advice for you & for the children.

None of us have seen DGM's will nor do we have the legal document that defines the terms of the trust. So we cannot actually know what OP is or isn't legally able to do. OP, you need to seek legal advice. And as I have suggested already, do everything that you can to sort your own finances and credit rating out, regardless of what a solicitor says you can do with the trust.

Use their trust for their extra curricular, holidays etc. Then pay them that back when you sell the house in ten years if you feel guilty about them using their own money.

And invest it better. You should be getting far more than you are, so are making wrong comparisons between current growth and growth from 'investing' in your house.

And get a better mortgage rate. You don't need to pay it all back in 13 years as you can use a pension lump sum to pay the balance. You could even access your pension now and use funds to pay down the mortgage, or change to interest only.

And a record has to be kept.
With receipts
For the duration of the trust. ( and only if specifically allowed in the terms of the trust, some do not allow any access )
The money must be for the direct benefit of the child.
Not indirectly to pay off a mortgage.