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.

I've got no idea of the legalities and I'm not going to guess.

However, if it could be done legally to protect the money for the future, I would do it.

Another however - you really need to talk to a mortgage broker. Your circumstances have changed radically, it is hugely unlikely you won't be able to remortgage to another lender and drastically reduce your payments. My mortgage is about £150k, but that's at 90% LTV and I'm only paying £600. Your LTV is less than 40% - so even a sub prime lender is going to see you as a much lower risk now. You should look into this first.

OP has clarified this point. Her credit record will be shot and access to a better mortgage rate nonexistent or very limited.

If you’ve been paying your mortgage for ten years, and with that amount paid off, your credit rating should have improved, i would definitely try that Avenue first.

natwest

Heres the NatWest mortgage calculator (others are available]]

The children can access their money before they turn 27 if they need to, with the agreement of the trustees that it's in their best interests. So what would you do, for example, if one of them wanted to access their money at 18 so they could study abroad? Would you sell up to release their money? Or they've just passed their driving test and want to buy a car, would you sell up to release the money they need?

Could you get something put into writing to say that the house will be put up for sale on or before (date youngest is 26 - perhaps with some sort of break clause in the event they wish to continue living there or that the full value has already been returned to their trust)

That way you have covered them for return of the funds properly.

There would be some interest if it was in a bank so this could also be factored in.

I do think security and not having to move is important for their lives too. It's okay saying 'don't' but if the alternatives mean they have to move schools and uproot their lives it seems daft.

You won't need a family home when they are adults

Provided (1) it is arranged as loan from the trust fund to you with security over the house; (2) you pay interest at the same rate as the money is currently getting on deposit; and (3) you enter into an agreement to vacate the property when your DC turn 27, it seems to be in everyone’s interest.

But you do need to seek legal advice to cover yourself as trustee and your DC as beneficiaries.

If it’s allowed then personally I think it’s the way to go as the house will increase in value so their money will always be there but you need guidance as your children will not be protected, so you would need to put 25% of your house in your children’s name ( a trust ) so that their part is always safeguarded . The issues are , what if you remarry or have more children as an example ,that would leave their investment completely unprotected .
find a solicitor

Invest it in a portfolio for them.

It might not go up in value

@ArdeteiMasazxu I don't see how that would be allowed. That would be OP using her children's money to pay OP's debt

No, this isn't right, and can't be legal. You don't know the future. I can see it's tempting, but it was left to them individually.

I'm not sure you can do this. There'd need to be some sort of legal document so you can show your DC. And you'd need to sell the house when they reach their age of inheritance.

It all sounds a bit dodgy.

Surely money invested in a house is a good investment? Yes I know house prices could come down but how likely is that?
Where is the money going to be kept until they are 27 and what rated return can you get on it?
As a mum of adult children I would not want them and my grandchildren to not have anywhere to live whilst money is sitting in an account.

You can also speak to the children about it. When my mum did this she spoke to us about it and we were happy. Probably similar ages. Children aren’t dumb. And children in single parent families see how much you are doing for them and are usually grateful for the chance to help.

Second person saying don’t cos I’ve seen it happen. It doesn’t end well.

DGM used DM’s trust inheritance to do up the house of her second husband on the grounds the teen DM would benefit cos she lived there for a while. Major renovations, garden landscaping, the lot.

When DGM died she left the house to her four DC by DH2, who she’d had after DM left home. The trustees were sued - incidentally, you & your sis are personally liable for losses these days.

Given the ridiculous amount of interest you are paying on your current mortgage (we have a mortgage of £500K and we only pay £1600 a month!), yes, if approved by the other trustee and with an agreement in place that protects your children's share with interest, I would do it.

Ultimately, you're creating a better life for them now and hopefully will be able to set them up with further education opportunities and financial support for their interests, travel, independent living, all the other sorts of things that young people benefit from to launch into life.

I expect you'd need to secure independent legal and financial advice for the children. In the terms of the current trust, by when could then become entitled their share - settlement on ten years of establishment/after 18 years of age?

One hook you might use is the nominal value of cash in an inflationary environment. Lots of people see cash in the bank as being safer than shares or property but depending on the deflator will see the purchasing power erode by half? A share of a property might be seen as a reasonable investment in these circumstances.

Good luck.

It will , it might drop for a shot time but the kids are young the probability of it not going up within 10 years is so small it’s percentualy non existent

You might need to square off your lender if you proceed too.

So what happens when you don't want to move when they are 27 and they have the guilt of evicting mum?

That was my first thought too, and insisting "it wouldn't happen" doesn't cut it when none of us know what's around the corner

Happily there have been plenty of suggestions for handling this better, so here's hoping OP adopts one of them

You need to solve your two issues separately. It's difficult because you're trying to solve one with the other and you can't

Not the first time I’ve heard this scenario.

This is a really different situation

Please don’t do this. Your children may well need access to this money before they are 27, particularly for university, or they may want to take on their own mortgage earlier and need a deposit sooner. You need to be clear this is not your money and look for the best investments for it and then tackle your high mortgage rate separately.

I have zero advice and experience re law and finances (other than get a financial adviser asap for your mortgage!) but I just wanted to say, in your circumstances OP, I’d be thinking like you. If it’s possible and you can ensure the children don’t lose out as adults, I’d do it in a heartbeat. They’ve clearly had a lot of emotional instability, so practical stability now is key.