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.

You should not take children's inheritance. Most building societies are offering short length bonds at 4.25%.

I think you and your friend need to speak to your solicitor to understand what your obligations are as a trustee, as you seem to be focussing a lot on you, wrapped up in a justification of it being best for the actual beneficiaries.

£167k invested at a moderate 4% return per year over 12 years would result in them having a well over quarter of a million pounds. And I think your children need separate legal advice.

It sounds to me like a very bad idea. You say you’ll sell when they are owed the money. But will they just get the £167k, or £167k plus interest? If interest rates are higher than house price inflation then you’ll owe a larger and larger proportion of the house value over time, leaving you nothing to buy your own house with. Effectively forcing the children to defer receiving the money until you die. Unless they evict you - and I bet you’re working on the basis they wouldn’t do that. I think it has the potential to destroy your relationship with your children.

I don't really see anything wrong with it. I like what a PP said about speaking to the children.

What would the situation be if you remarried? Would the house then become a marital asset?

No but investing in property might be

you seem to be focussing a lot on you, wrapped up in a justification of it being best for the actual beneficiaries.

This is really unfair. A lot of your comment is useful and there's much for OP to consider, but your essentially accusing her of trying to exploit her children and benefit financially at their expense. It's insulting and hurtful. She's just trying to weigh in the benefit of them having a comfortable upbringing and all the experiences that brings.

I wouldn’t want my mum selling the family house so I get my inheritance. I’d tell her not to. But I can also see how young people today are going to have a nightmare getting on the property ladder in the future and that money would be very helpful.

Given your circumstances and your updates I would see what you can legally do.

DH and I have been saving for our children’s Uni bills for years, none attend uni yet. We just took a huge lump out of the money to pay off all of our normal debts (house and car loans) to allow DH to take a much lower paying job that will facilitate him spending far more time with the children.

In time we will build back up their money (DHs salary will rise again quickly) and we will still pay their uni fees but it made zero sense with interest rates the way they were to have that money on deposit or even in long term saving schemes rather than to loan ourselves the money and pay it back over time to the savings to facilitate a better life now for our children.

I know it isn’t the same because ultimately it was our money anyway but ultimately I see that you are freeing up money for your children for now and planning on ensuring your children have their money back from the sale of your house or savings in the longer term. When they are adults you can get an apartment as you won’t need so many rooms.

Money left to your dc is not yours OP.
You cannot chose what to do with it.
It goes into a trust for your dcs to have when they are 27.

No solicitor in their right mind would advice you otherwise.
Your financial situation is irrelevant.

If your mum wanted you to have the £167K she would have left it to you. She didn’t. She left it to her grandchildren and that is how any court of law will see it as her Last Will and Testament.
Theres no point fighting it. It’s not yours

Can you do half way? Pay off £100k and keep the £67k gaining interest for car buying/uni fees etc

I really think a better quality of life now is incredibly important

What would happen if you died OP? If all the kids money went into the house wouldn't they then lose out because of IHT?

(Hopefully you won't! But as a single parent it's good to think of these things)

I still don't believe you need 18k for what you are proposing. That's 1500 a month for extra curricular and treats!

In blunt terms it's not your piggy bank to raid. Get yourself a better mortgage and invest their money more wisely. You are assuming life will stay the same for the next ten years. Worse case, what if you lose your job and the house get repossessed? Truly hope not but what if one of the DC needs medical/social care? Property prices could easily stagnate in which case in real terms you've eaten away at their inheritance.

@PhyllisFogg yes I see your point

I think having this money around is maybe encouraging OP to see it as a fix....but there are other issues that need fixing first

OP has used this to put straight toward the mortgage which she had with her ex who has now skipped off abroad leaving all the financial responsibilities to her. She doesn't have it sitting around .

It is worth seeking specialist advice from a solicitor specialising in trusts and estate planning.

Obviously you can just withdraw the money and pay off the mortgage with a vague plan to pay it back.

That doesn't mean that you can't find a solution.

It might be possible for the trust to purchase a share in the house and enjoy any increase in the value of the property. You would probably need to pay rent to the trust but that is invested for the children so they have a double benefit.

It might also be possible for the trust to lend you the money with a repayment schedule including interest.

You would need suitable legal documents to be in place though and would need to pay for advice.

Seeing whether you can get a better mortgage deal might be an easier first option.

@Youknownorhing You need professional legal and financial advice because every trust is slightly different. I’m sorry that you’ve had such a difficult time recently.

Do you have a decree absolute? Is your ex removed from the deeds (not just the mortgage) of your home? Have you contacted the police about his fraud?

If you’re struggling then using it to house and feed the kids is fine.
My mum emptied our kids savings accounts to feed us. She told us when we were older. I held nothing against not having money for a car when she was at the stage where she had to use our birthday money for food.

Pay off the mortgage, give them a good childhood and if you want when you’re older, sell and downsize your home and give them a deposit if you wish. Inheritances usually go to you then them anyway not straight to them.

Honestly setting it up formally, via a loan with interest seems like the best use of the money. You need to decide if they just receive interest or get a share of the uplift of the values of the home and need to thinking about who take the hit of the value of the home goes down. As long as you know the house will need to be sold or you decide to roll forward the loan with their agreement I honestly don’t think this is a bad thing. But it must be formalised and notarised by a solicitor. Not all situations like this have to end in tears. As long as you always put your kids first then it is fine.

I genuinely wonder if the OP could invest the money into the house with the children l’s trust then owning that proportion of the family home. The benefit of doing that is that the house is likely to rise in value over the years and when the house gets sold the children would recoup a higher investment than the current amount. The only thing is that the house would have to be sold when the older child reaches 27.

It's a difficult one.

I would say it should be put in a safe place where it generates an appropriate amount of return. A solicitors should be able to advise you on considerations for this.

I also think leaving it untouched until they are 27 is pretty impractical as well. There is a conundrum in the respect that kids probably are shortest of money around their early twenties but that is probably when they are most likely to squander it if they inherit large amounts.

I would probably want be doling out lump sums to them from their inheritance to help them through the university period long before they reached the age of 27. 5k or so a year to them at 18-21 is going to be far more helpful than getting 90K dumped on them at 27. So tying up the money in a mortgage would probably only work for me until they were 17/18 anyway, which is 5 years away.

A saving account is not the same as a trust.
Money left as part of inheritance cannot be dipped into.
It is not OPs money to spend.
We ve had this with so many relatives that think they can take their kids inheritance. After multiple cousins and my db spending loupes of money on solicitors the result was always the same.
Its the kids money, it’s the grandparents choice, no one can take it.

It's easy to talk about moving when they are 27, but you won't want to. You will be clock watching once they hit 24 and starting to dread it.

Not fair on them to bare that responsibility - and actually not fair on you to have to give yourself a self-imposed eviction date.

Even though your financial mess sounds like it's the fault of your ex, you are living above your means. You should close your eyes to the DC inheritance and make a plan that works using YOUR resources. Only exception would be very VERY short term loan.

As long as there's a way to do this all legally then I'd go for it.

You're investing in property - and giving them somewhere nice to live, and a nice life. It's in their best interests.

However, I'd be very strict with what I did with the spare money. You were paying £500 a month mortgage before, is this still affordable, with a decent quality of life? Invest that £500/month. Forget it exists. Get advice on this, low risk investment with a steady increase predicted. Ideally dividends too. (Mutual funds/exchange-traded funds).

That £500/month will grow over 15 years. Sit tight and forget about it until you need it.

You're not stealing from your children. You're giving them the best life possible in the circumstances. It'll help no one if you lose the house and have nowhere to live, and then nothing to leave to them as inheritance.

The Trust would have to cotninue and it would be the Trust that purchased the share of the property. Care would need to be taken when selling the property as a discretionry Trust has its own taxation regime and capital gains tax is higher for a Trust. However Trustees can also claim principal private residence (PPR) relief on the disposal of residential property that has been occupied by a beneficiary of the Trust as their only or main residence (so you would need to very much be careful about the children in the future, that home would need to be there only or main residence at 27 when you sold otherwise you would inccur a Capital Gains Tax liability on disposal) . The Trust would buy the % of the property and then on sale would still own the same %, so would beenfit from any gains (or of course losses). It is a higher risk investment strategy than leaving funds on deposit, however given your circumstances I can undertand your thought process entirely. I think whislt it could work in the shoert term, there is issues a plety for the future. Take legal advice. I havent read every post but you obviously have financial issues on being unable to remortgage, can you do a product switch with your existing provider at all which may bring down your mortgage payments? this wouldnt involve having an affordability assessment.

If DCs own a significant proportion of the family home how will costs for improvements/repairs be covered? A new boiler, roof repairs, maybe an extension.

What happens if you decide to move? Do they get their share back?

How much say will they get as they get older? At this age they are relatively pliant. In late teens or early 20s they may have stronger opinions.