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.

She hasn't really clarified it @Niceseasidetown

She's made comments but they don't make any sense as other posters have also pointed out.

If her ex extended the mortgage to pay for drugs, and used her name etc fraudulently, that is a criminal offence.

He is still a UK citizen, he is not 'safe' even when living overseas, as he could be pursued and prosecuted for his fraud (using her passport and fake signature etc.)

The crux of this matter is not to try to change the Trust that's set up, but to call her ex to account and allow her to be free of any poor credit ratings based on his illegal behaviour.

In the UK adult beneficiaries can usually apply to have their capital when they are 18, even if the trust specifically says they must be older. Depending on the exact wording of the trust this could well mean that you would have to sell up in 5 years anyway. Also that 5k yearly interest should be adding to their capital. If you are saving 18k a year on your mortgage the legal argument would be that while that is nice for them it isn't actually financially benefitting them, but benefiting you, even if you use that money to give them a nicer life. It's also potentially much riskier putting the money in property. If you or the other trustee are found to have misused the contents of the trust you could both be individually liable; that means if you do this, without or against legal advice and the house value crashes and you lose the money then your child could sue your friend and / or you once they are 18 and get the value back from any assets either of you have.
Speak to a solicitor but I agree with others that, as described, the plan is unlikely to be legal and has some pretty big risks

If the mortgage payments are onerous, why not sell the house and buy a smaller cheaper house?

You’re downplaying how much their nest egg could increase if it was invested wisely. There is no reason in the current market for that sum of money to make such little interest. And you need to be mindful of the magic of compound interest. That sum should have increased SIGNIFICANTLY by the time they’re 27, if the trustees do their job and look after it in the children’s best interests.

So if you choose (and are able) to use the money on your house instead you should be prepared to pay them whatever they would have had if the money had been properly invested. Give them back the same sum and you would have utterly shafted them. Stolen from them
in fact. Which means you’re totally reliant on your house value increasing in line with the stock market. So you would be gambling with their inheritance.

It also means you can’t ever remarry - you may think that’s not something you want now but things change over time. Even moving a man into their house could introduce legal complexities.

And even though you’re dismissing it, the emotional burden you’re placing on them of having to effectively evict their own mother down the line in order to get their money for their own house - sorry but that’s utterly cruel. Even if you plan on happily moving out as planned, they will feel horrendous and you’re wildly out of order to put that on them.

I’m sorry to be blunt as you’ve clearly had a shit time but there are times you have to be the parent and the grown up and this is one of them. You have to find a way to improve your situation without using your children’s money to pay your household bills.

It sounds very sensible tbh. You as joint trustee have an obligation to make the best use of the money until the DC are able to have it. Investing in property is a very sensible investment, particularly as it will give you all a better quality of life.

Provided the legalities are secure ie a charge over the house in favour of your children then it sounds like a good plan.

I have known trustees invest in a buy to let property with their DC's inheritance and I cant see that this is any different.

Just a slightly different angle to consider.
If the kids have part of thee house put in trust, and then want to buy a house
a) do they loose any first time buyer incentives (LISA and stamp duty relief currently, likely to be different by that point)
and b) if its before the trust is dissolved, are they classed as having a second house, with additional costs associated with it?

Because the mortgage is with a lender for dodgy mortgages. Ex husband developed a coke habit and remortgaged the house multiple times . Forging my signature. Supplying my passport details and various other bits of ID. Hence why he is abroad.

There was over 300 on the mortgage by the time I kicked him out. I paid off with my share of inheritance but still left with hefty monthly amount but at least I was able to take that on on my own and get him off the mortgage without having to give him anything

How does this mean the OP can't arrange anew mortgage at a better rate?

She's paid off a more than half with her share of the inheritance.

Why does she have a poor credit rating? Extending your mortgage, then paying off a lumps um doesn't add up to a poor credit rating.

There must be other stuff we don't know of, or she's confused.

Not if it's held in trust @catsinthechair

This is why people with disabled children etc are advised not to leave money to them directly as can impact all the support they have in place.

@catsonthechair not in!

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

MN is not a legal helpline OP.

You have to see experts.

1 a financial advisor
2 A lawyer who works with family trusts
3 Possibly the police as your ex has committed financial crime and incriminated you.

I'd like to see the OPs answer to the question regarding whether her ex is divorced and whether he has any claim on the home (is he on the deeds?)

Personally I wouldn't do this as we have no idea what's around the corner. I say this as someone whose DH was diagnosed with Stage 4 cancer 6 months ago. He's so ill he'd be in no condition to sell or move home. If my parent was ill I would feel too guilty about having them move from their home, even if they seemed willing to do so.

It's not your money.

What happens if you meet somebody wonderful this weekend, fall in love, get married, blend your families, and even go on to have two lovely children of your own. Maybe you sell your current - now mortgage-free - house and put it to his assets and buy a lovely big family home with a garden. The dream.

How easy do you think it is going to be to sell that house (is your new husband really going to love that idea? your younger children?) to return their capital to them in 10 years? Or will you explain to them that when their new brother and sister grow up and go to uni, you will sell the house THEN and give them their capital. Or will there be another excuse then too?

Please ring fence this incredible gift they have for their future. Don't take it away from them because you have spun yourself a story about how it's actually in their interest. It is not. It is in your interest.

Get financial advice on your mortgage situation and leave their money alone.

Tread very carefully.

I suggest that the other adult Trustee seeks independent financial, legal & inheritance management advice on behalf of the two children, so there is no conflict of interest & also this limits any future liabilities for the two adult Trustees of the Trust.

Trust rules can be complex & need to be carefully managed for tax purposes.

By seemingly transferring the childrens portion into the family home to counter the impact of an inefficient mortgage may seem like an all round with extra jam for tea. But there are many legal issues waiting to play, not least the children’s wishes when they reach adult majority & are in a position to get their money back as they deem fit, not as mummy may prefer. Legal demand for original sum & interest due when one reaches 18yo is a possibility, & this may force house sale or the OP take out a loan to meet this legal charge.

OP, I’d keep things simple: Sort out your mortgage with reputable financial broker who can find you an efficient bespoke loan that suits you best; take independent financial advice sought on behalf of the two children & build a portfolio for growth over the medium term - better that they may access a well grown sum as adults for educational or housing investment when they know their own minds & adult preferences.

Again, take independent legal advice.

I thought the whole point of money being left in a Trust was that it was untouchable, except in very rare circumstances where it was used for the child's benefit? (eg education.)

We looked into setting up a Trust for our DCs and were advised that it was very complicated. I may be wrong, but I understood that if money was invested, on their behalf, some of it may be liable for capital gains tax in the future.

It's a very complex issue and certainly not one to be decided by anon post on social media.

I did it. I agree with you it made the most sense. I extended the house so they had a bedroom each and a big kitchen diner which improved family time. It was all done properly and legally. They will get it back when they are a bit older. (The other option was live in a dump and share a room until they were adults or move away from friends and schools etc). I did what was best for them.

It does need to be done with the input of a lawyer as all circumstances are different.

Seek proper legal advice OP but I don't think it's necessarily wrong. All those seeing a wonderful nest egg are probably undervaluing a financially secure childhood. You'll need a solicitor anyway to reflect their ownership in the deeds but if they're joint owners they can force sale and property is a decent longer term investment. Could be win win

I would absolutely use it to pay off the mortgage. Either offset mortgage so I could easily access it again when the children are 27, or commit to downsizing as soon as they'd left home.

Much better plan imo than having that sort of money being eroded over years by inflation earning pathetic interest.

However, if it wasn't an offset mortgage I would also divert the equivalent of the mortgage payment each month in to a savings account so I had as much saved up and accessible immediately as possible in 15 years. Like treating the money as a loan from your children rather than the bank that you are repaying.

@Youknownorhing I initially thought no, but perhaps this actually may be a real positive for the children. IF it is all documented from day 1 and a solicitor or accountant can have access to all the records from now until sale.

The reason I think yes is

• children will have a better quality of life (I assume your mother would have wanted that)
• You're saving money that would be paid in interest to the mortgage company and instead using that to benefit the children
• My one provision would be that the £400 you used to pay into a mortgage should be paid into a long term savings account with interest paid. That way at the time to sell you also have cash that is split between you and the children so they will have that benefit as well.

The answer to your question is in the trust deed. You need more advice from the solicitor on what you can do with the trust assets. Trustees do have discretion if the trust allows, but "in the best interests of the children" doesn't sound like trust language.

You need to tread very very carefully here. Breach of fiduciary duties can be serious.

It's also arguable whether you taking your children's money to pay down your mortgage is in their "best interests". You will need to be able to prove, should the need arise, that ALL of their money was applied to THEIR best interests, equally (I'm assuming). That's a lot of paperwork, if nothing else. And, you need to have all that money available to both of them when they turn 27. Good luck with that.

Don't do it. It looks like an easy answer but it's clear from the questions you're asking that you don't know what you're dealing with.

Your housing situation is ridiculous. Sort it out. Without taking trust assets that don't belong to you. This isn't the easy fix you think it is.

It’s a trust. The purpose of which is protection, not growth - it’s written in the Trust. While I get where you’re coming from, it was there to be protected and therefore needs to stay in the trust.

No judgement from me but I think a lot of people, including perhaps you OP are misunderstanding the point of funds held in trust. It isn't that the children can't access the funds until they're 27, it's that they can't access them without approval from one or both trustees (depending on how it's set up).

Therefore if your child would like the money to buy a car at 17, or to go to University at 18 or to put a deposit down on a house at 24 the funds should be available for them to do so, but only with approval from the trustee.

I absolutely appreciate your desire to keep them housed securely and maybe this is the best solution - but it is really important to remember it will deprive them of options on how to spend that money prior to the age of 27 that they otherwise would legally have had.

The other glaring issue is that very much may change in 15 years, you could meet someone else, get re-married, have another child etc.... and things like that have the potential to put their ability to gain access to their funds when they want them in jeopardy.

If it was me I would explore all other options regarding your mortgage before going down this route - and remember, you are legitimately able to use funds from the trust for their extra curricular activities, holidays etc... now if you are struggling to pay for those things for them at the current time.

If you sell the house when they are adults and it's not their primary residence there'll be capital gains tax to pay.

Pay off mortgage and set up trust so kids are tenants in common with shares of house proportionate to money they put in.

It's not your money - it's theirs. Sounds far too complicated. You need to sort your mortgage out as those monthly payments are insane - our monthly payments are that much but our mortgage total is more than double that. And we're on 30+ year term.

It is possible to do - I have clients who have done this. But you need to be super careful with the wording of the trust deed (the Will if it’s a Will trust).