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.

Several things:

First, do you have a clean break consent order with your exH? If you are not divorced with a stamped financial order he can still come after half the house. If by paying it off you own the full house, you children's inheritance could go to him.

Second, how will it be owned to reflect its their money? Will it mean they're considered to have owned a home before and therefore remove first time buyer benefits from your kids because you used the money to pay off your house?

Third, what happens if the house loses value and its not worth enough for you to give them their share and for you still to have enough to get yourself somewhere else? You won't qualify for another mortgage.

Honestly you'd be better off selling and downsizing into a more managable property now you can afford without taking their inheritance.

I'd say yes & agree with this. Quality of life for them now matters so much. Good luck Op as it's tough.

Second, how will it be owned to reflect its their money? Will it mean they're considered to have owned a home before and therefore remove first time buyer benefits from your kids because you used the money to pay off your house?

No child can own land or a building. That's the law.

If it's genuinely a discretionary trust and if you are a potential beneficiary then you can absolutely do this.

If it's actually conditional on them getting it at 27 then it isn't a discretionary trust and they would be likely to be entitled to income from age 18 to 27 so if you don't invest it to produce income then you aren't acting in the best interests of the beneficiaries and are in breach of your duties as trustees.

I'd speak to the solicitor about what kind of trust this actually is and what your duties are as trustees.

She’s not a beneficiary, and she must act in the interest of all beneficiaries, not herself or her mental gymnastic logic about indirectly helping her son. It’s fucking scandalous.

I also wonder if transferring ownership to the trust would incur a stamp duty charge?

Just playing devil's advocate (because I also suspect she will in breach if she tries to do this) how do you know she isn't a potential beneficiary of a discretionary trust? She calls it a DT and common wording would be for it to include children and their issue with a side letter indicating wishes for grandchildren at 27. But wishes are just wishes and not binding.

None of us know how the Will is worded, except, presumably, OP. Which is why she needs to take legal advice!

Because she’s a trustee. Why would you hold money in trust for your own benefit? There would be no point. Even if she was a beneficiary, distribute her share to herself and use her entitlement to pay off mortgage debt.

Leaving her sons entitlement alone to grow unhindered by her hair brained selfish schemes

You can be both a trustee and a beneficiary, provided you didn't set the trust up yourself, which she didn't.

This thread proves that everyone has their own take on it from all angles and that legal advice is needed!!

Makes perfect sense to me. If you are loaned the money and pay them interest Then it’s win win,

Then how will the money be ringfenced as theirs rather than OPs? If OP suddenly got in an accident and couldn't work or needed care or her exH came after more assets, how would the kids' money be protected?

It will be owned by the trust.

Sorry money wasn't given to you your basically being asked to look after it so no I wouldn't be using it on a house that's your responsibility to either keep it or sell to a more affordable one.

So use their money to buy your house that they have shared in but in 15 years or less they might be looking for a home but be deprived of the start in life they were bequeathed because you've used the money....or do they force you out of your home by forcing a sale?
No if the intention was to pay for your house all the money would have been left to you.

Agreed. I don't see how this is an investment that benefits the children either? It won't generate interest, potential to lose money. No way to access capital if required before the age of entitlement (usually trusts provide capital can be advanced early at trustees discretion so for uni fees). The house would have to be held part in trust as the children aren't old enough to be legal property owners which also brings other issues. Red flags all over.

It can be used to pay the mortgage lawfully if they lend it or get a part of the property. Just needs to be dealt with properly .

If OP cannot afford their current housing on her own salary and a move would be detrimental to the children (worse house, worse area, need to move school, etc.) then there is an obvious benefit to the trust paying towards maintaining the better housing they currently enjoy. Especially since there should also be appreciation on the asset (if the trust buys into ownership), or interest from OP (if the trust makes a loan).

They almost certainly will get their money. The OP just needs to sell the house, which she’s likely to want to do anyway once the kids have left home and she doesn’t need so much space.

Even if it does go tits up and the house loses it’s value and she can’t give them their inheritance, I’m sure they would rather that than living their childhood in poverty now.

I’d rather downsize now and receive upward of 300k once entitled than invest in a single mother. It sounds harsh, but as trustee that is how objectively op should be looking at things.

Alternatively you could always use half of the money and reduce the mortgage to an amount you can pay and have quality of life and keep the other half in the trust. 🤷‍♀️ I don’t see why it needs to be all or nothing in this situation. Obviously you’d still need to sell in 15 years time but it seems a less risky option. 🤷‍♀️

I don't see any reason why this can't be arranged. You will need to do it properly through a solicitor but part ownership of a property is likely to offer the children a better return than bank interest. If it is in the best interests of the children then go for it.

Why is a binary choice between cash and a single leveraged asset? Madness.

Under a first charge from the lender?

I can't think of any financial bod who'd recommend property for 15 years over investment (and I know a few!)