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.

Just defer to someone who does this for a day job. An offshore bond is an extremely efficient wrapper for this kind of arrangement. A share in a single residential property or bad debt it not.

The trust would still own the house.

The aristocracy use trusts to avoid second home tax and inheritance tax. The Duke of Westminster does this, it was set up by his father or grandfather and owns Eaton Hall (his primary residence) and the rest of the Grosvenor estates. The terms of the trust will make the new Duke the beneficiary when the old one dies. For us peasants, the costs associated with setting up a trust usually outweigh the second home tax.

@Youknownorhing I think you're taking a sensible approach, giving the DC security in the here and now. People seem to have missed the fact their DF has fucked off and left them and isn't contributing to their upkeep - he's not suddenly going to give you money without a stressful court case.

You've thought of a way to minimise upheaval and give them stability in the home they know. I don't know why people are assuming you'll steal the money from them - it can be legally sorted and sounds like you won't guilt them at the point you need to sell up.

Its a huge benefit to have security of mind in knowing you've safely housed your children and aren't stressed about making mortgage payments. It is so stressful to manage financially on your own, while trying to navigate lone parenthood and making sure the DC are growing up OK in a split family (especially when their dad is useless!). Surely it's better for the DC to grow in a stable and less stressful home now, and know they've got their inheritance (with increase in equity) to come.

It wouldn’t apply because neither child has had a mortgage or been named on deeds.

Eldest child is 13. What if they are especially mature and decide to marry, buy a car and buy a home at 18? Or decide to go to university. OP going to sell a bathroom? Or does the beneficiary miss out because the trustee chose an illiquid investment vehicle?

Ordinarily the trustees could decide to distribute their share. 27 is the age that it MUST be distributed, not a scheduled end point of a fixed term.

You can't predict how your children will feel about making you move house in ten years time. Not to mention, the more their lives are built where the are currently and you later having to move away from them to the north. They may stay where they are now.

Just downsize now, bite the bullet and make all your lives more sustainable.

Once the children are 18 they will want to go to university or get a job and move out, that's the time to downsize not now. You could even change the cit off time to 21 perhaps.

What if OPs children work out how their own mother is misusing the assets of their trust and successfully appeal to have the trustees removed or the trust wound up? OP could be thrown out of her home!

I'm sure they will happy that they have been able to stay in their home, rather than the money put into some scheme with huge fees.

Urgh, the plan I outlined is mainstream popular family wealth planning strategy used by thousands and thousands of people up and down the country. It has nothing to do with Jimmy Carr or the Cayman Islands, just a simple single premium Life Assurance bond that is administered in the Isle of Man. Tax is levied when funds are remitted so it affords the trust the facility to bear tax at a time most advantageous to the beneficiaries. It is likely to be far cheaper than a solicitor drafting the kind of agreements talked of here.

Could you downsize your current home?
I don't think you should be touching their money. It's not right. It was left for them.

My mortgage went from £500 to £1400 in January.

How come your mortgage shot up in January? Did your ex remortgage it again then, before leaving?

Probably not cheaper. It costs a few hundred pounds to draft a suite of private loan documents.

@FunnysInLaJardin and how much in legal fees for the beneficiaries to act to remove the trustees when they are not able to access their entitlement because the trustee loaned all the money to herself?

In any case, tax efficiency alone would dwarf the fees associated with a bond, and over medium - long term a mixed asset portfolio with gross role up is much more likely to deliver a risk adjusted return.

@Everanewbie I wouldn't worry too much about fees. So persuasive have you been with your considered and rational arguments, that I am sure the OP will be in contact soon to ask you to invest the trusts money.

What with you being the professional and all

So you'd not worry about solicitor fees to facilitate an inefficient high risk loan to a herself, but the fees to set up and run a well managed diversified and tax efficient vehicle is somehow wrong?

Well, if OP would like to be in touch I would gladly put her in touch with several excellent people who could help. But somehow I think this post is more about validating her abuse of her position as trustee under the veneer of security for her children.

@Everanewbie you have confirmed everything I have ever thought about IFAs...

Haha what might that be then???? You seem to find it abhorrent that a qualified expert charges for their services, do you think mechanics should work for free?

@Everanewbie I bet if I was 90 years old and came to you for advice, you would recommend the offshore bond 😂

God, you are insufferable aren’t you

You aren’t getting this are you?

@JenWillsiam are you an IFA too?!

@Luckydip1 or @Everanewbie in disguise 🤔

No. But I am aware that you can use trust funds in the way described by the OP without a lot planning.

This is why it’s so important to ensure that the trustees have at least one brain cell.

Of course the alternative to this is that the inheritance is put into a high interest investment and the income used to pay maintenance for the children. Any discretionary trustee can legitimately use the income towards the education of maintenance of a minor. Maintaining a secure home would be perfectly reasonable in these circumstances.

The perfect solution requires an individual approach given the full picture including the detailed terms of the trust.

There are plenty of options the OP could explore with the help of a real professional (not an IFA!). OP I suggest you look for a solictor who is a member of STEP (Society of Trust and Estate Practicioners) to help you. They will often provide the first appointment for free which may help you understand your options.