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.

*education or maintenance

No no no no. You absolutely cannot use the profit from the trust for maintenance!

A STEP solicitor is a good starting point. They are not the best person for investment planning. They are complimentary.

Perhaps you could explain why a chartered financial planner is not a real professional?

@Everanewbie you only have to look at the history of IFAs to see how they have robbed their clients for decades, the whole profession is an utter disgrace.

How disappointing. Nothing but pub talk from someone with no knowledge of what it involves.

The money is to be used in the children’s best interests, not yours. Sell your house and downsize. If you use their money you will have to pay them rent as they will own % of the house.

I’d be very shocked if legally this is allowed.

Talk to a mortgage broker. See if you can find a bank with mortgage offset against the children's funds. That way their money will remain in their names, but your interest bill will go down. Your plan could be an alternative, but do get it recorded in writing through a lawyer.

The grandmother left a house 4 ways. 2 adults, 2 children. The adults had their share, and the children weren’t old enough to make their own decisions so trustees were appointed to look after their share until they come of age. One of the adults, who had their share was trusted enough to look after the children’s share to the best of their ability. Instead of doing that they want to put it to use for themselves, to reduce interest payments on a loan they took out. If posters really can’t see what is wrong with that, then I pray to god no one ever puts their trust in you to be a trustee, power of attorney or deputy.

Why should the trust fund be used in a manner that doesn’t have the value of the trust at heart? I highly doubt whether the trust could be used to offset the the mortgage given that op has no beneficial interest in the trust, but even if it could the advantage to the beneficiary is non existent beyond this tenuous concept of making the household more secure by reducing the mothers interest payments on a loan.

I cannot afford school trips, a holiday or new clothes for them. We have cut 3 extra curricular activities.

You can use the interest on their trust funds to cover all of this.

and also grow with house price increase

Have you seen the state of the housing market lately, and have you an appreciation of contagion in financial sector ie falls are coming, baby boomers dying will release a lot of property onto the market too… You have no guarantee of continual increase and actually the converse is due.

Thank you for everyone's advice.

I have now had advice from an IFA - who based on our circumstances my ability to increase my income , my future pension draw down and the children's wishes to remain in this area with their friends. (We could not buy anything here for the equity I have left ) they have agreed that investing in the home is sensible and logical. With some protections.
The trust will loan me their money and I will pay interest at the rate it was on deposit on in Barclays or the % increase the equity makes at the point of sale. Which ever is the higher . In this way we have my income to live on. The children's money is protected.

I am absolutely sure that I do not want and would never ever consider drawing down on the children's money for things their parents should pay for. It is not their fault that their father is a complete shot who has skipped off abroad to avoid his family and paying maintenance for his children.

It is absolutely not right that they pay for their own school trips , family holidays , driving lessons , swimming/gymnastics classes. These are the costs of having children. Not self funded by the kids.!

The money is meant for house deposits and this way I can use my own income to raise my children without touching theirs until they need it .

Thanks for the update @Youknownorhing . The children will be glad of the stability, staying in their home and near their friends. They've had enough upheaval with their dad.

I found this thread really interesting in how people prioritised having the money immediately available to the DC when they turn 18 (or early 20s) vs stability now and all their money (plus increases) at the age your DM wanted them to have it. All the talk of how best to invest - how about two children that must be feeling traumatised by their dad leaving them? So cold to focus only on the future money situation and not acknowledge their current emotional needs.

Also the way people have assumed you will make them feel guilty for selling up or will refuse to sell up - why would a loving mum suddenly do this? If you were that sort of person, you'd have uprooted them and moved back to your family, regardless of the emotional consequences of further change to them.

A great plan op. Win win.

I too found it interesting that so many people immediately rejected the idea. It seemed blatantly obvious to me that it was a good use of the money as long as it was done properly to protect the money.

In fact we’ve done similar although it’s with the children’s savings (that we’ve saved for them). It’s invested in a buy to let, and when the time comes to help out with a house deposit, their money will have grown much faster than if we’d saved it for them conventionally.

Is he properly "ex"? My main concern is whether he could lay any claim to the house if the mortgage is still nominally in his name too and you are not full divorced.

Otherwise the solution you've found seems completely reasonable.

Thank you Clingthefilm you are one of the few to get this. Majority of posters seem so wholly focused on money. It's important but not the be all end all. There happiness is much more important.

Their dad leaving and going abroad to a country with no Haig convention agreement means I can't even let them go and see him. Contact is limited to his twice yearly visits and when he can be bothered to answer a face time.

My duty as their trustee is to manage the money in their best interests. Ensuring we can afford to stay in the home they live with all their friends nearby - remaining in the same home.. is in their best interests. A bit of stability is what is needed above all else.

Also agree with you about those who think I will refuse to move or blow their money !

I live in a very unusual set up compared. With most of MN. I have siblings I love and who love me. I love my in laws, we don't fight, we don't argue - we genuinely like to spend time with each other... and we certainly don't steal from our kids ! When my eldest is ready to buy then this goes on the market and I move from this 4 bed to a two bed. and my youngest child's share goes in the bank until he is ready .

I am flabbergasted at this advice.

To the extent that I don’t believe you.

My sister took out a loan on the trust.

To keep a roof over their heads, it is worth asking.
176k in trust -£150k mortgage= 26k to stay in trust.
Borrow £150k from trust
14 years to pay it back (16 for younger child)
£10,714.29 a year
£892.86 a month
Minus interest, these are the figures. Can you pay this? If you can, do it!
Also, unless you have really nasty kids they will understand. You can tell them when they are old enough, but I’d say telling them too much will make them lazy and not try hard at school. Better that it’s a surprise, not something they are waiting for.
if that doesn’t work, I strongly recommend you change bank. My mortgage jumped too, but only by a couple hundred quid! Good luck!

Good to hear you have a good relationship with in-laws. Sounds like you're making the best of everything for your DC.

You should commend yourself, you've been through a hard time with your ex abandoning you all. Well done for keeping things going and thinking how to give the DC stability and experiences they deserve.

Glad you've sorted it. Won't the interest on the loan be as much as the mortgage repayments?!

It is absolutely not right that they pay for their own school trips , family holidays , driving lessons , swimming/gymnastics classes. These are the costs of having children. Not self funded by the kids

Not right to you maybe. My dcs inherited some money from a relative and used that to pay for driving lessons and to go on a school ski trip that we couldn't have afforded otherwise 🤷‍♀️

Don't know the legalities.

However if paying off mortgage fully frees up about 18k a year can you use some of it and half the mortgage again (to £75k) reduce your payments and then use some of what you recoup from a lower mortgage to pay back into trust?

That way you aren't at the point of needing to sell your home in 14 years time and you have 14 years to build back up the trust.

So if you borrow £30k from each child you only have to pay back £4k (plus interest) per year and you should have roughly 9k a year more than you do now going by your figures of paying off the mortgage.

So you are 5k a year better off and your mortgage payments may reduce during that time as interest rates should lower or your credit score improves the longer your XH isn't involved in your finances.

I have now had advice from an IFA - who based on our circumstances my ability to increase my income , my future pension draw down and the children's wishes to remain in this area with their friends. (We could not buy anything here for the equity I have left ) they have agreed that investing in the home is sensible and logical. With some protections.

So all the safeguarding of the Trust protections just thrown to the wind.

Your best solution is to downsize, but you've completely ignored that option.

But you didn't come here for real advice, just to have your plan (probably illegal) vindicated. Which suggests you have a sneaking suspicion that it's not entirely above board.

But anyway, crack on. I hope it doesn't backfire on you.

When my eldest is ready to buy then this goes on the market and I move from this 4 bed to a two bed. and my youngest child's share goes in the bank until he is ready

This "plan" makes me think of all the things that could happen over the next 15 years ...

All Id'd say is that I hope you have income protection insurance, @Youknownorhing either via your employment/pension or that you pay for separately.

I completely agree & think it's the best decision for the children. Good luck Op.