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.

The problem here. Apart from the fact you can’t do this legally anyway.
But let’s say someone did.
If the kids aren’t living in the house for a period of time they have to pay capital gains tax when the property sells. That’s tax for every year the6 didn’t live in the property.

Also
If they want to buy a home of their own they will have to pay second property tax as they already have an interest on their mothers home so technically their home becomes their second property. That’s 3% of the total price of the house they chose to buy for themselves.

It sounds to me like your children's inheritance is not in an actual trust. Instead it's left on trust (to be minded) by two people. You and another.

If I understand you correctly, your mother left an inheritance split 4 ways, 3 siblings each getting 1/4 each of £167K each, and then £167K split between your two children. You used £167 to pay down your mortgage to £150K and your repayments are £1500.

I went on the well known British website called Moneysupermarket.com. I put in a value of £300K, a loan of £150K and you can get a mortgage for £900 a month over 20 years. (I assumed you're about 40 with 20 years to retirement. You would get much more meaningful financial advice on a financial website. You are too focused on getting your mortgage to zero. There is way more involved than this. Who owns your current home? I suspect your Ex still does. So there are a whole host of potential problems with what you are proposing to do. As you have not given full financial details it is impossible to advice you (I am not a financial advisor but I am experienced).

You have my utmost sympathy as regards the mess your ex left you with. But it is important to do what is right for all of you. It's clear you are trying to do your best for both you and your children. Also you urgently need to get away from the vulture mortgage provider you are currently with. Seek advice from a proper free financial website, I do not know the name of a UK one but it must exist. And stay away from paid professionals who only want to get a fee, but proper paid advice also does exist.

So first step is ask on a new thread what is the name of a good free financial advisory website in the UK where you can put up all your details, mortgage, loans, credit card debt, other debt, outgoings, income etc. (mix up some of the personal details like location of ex, ages of kids etc)

Hi OP. Your capacity as trustee is a different role to that of mother and head of the family. Using trust assets to purchase a personal asset is very unlikely to viewed as in the best interest of the beneficiary. If you become insolvent, need care, house prices fall etc. all mean that the beneficiary loses some or all of their entitlement. Frustrating as it may be, you need to separate this money and your role as trustee from your personal circumstances.

I think you should do it formally. The children own a % of the house at todays value. It benefits them and you, you all have a better quality life.
I can't see what the issue is to be honest.
At 27 you have a conversation with the children., it maybe they are still living at home.
Is your ex totally off the deeds and mortgage?

It sounds like a good idea, but aren't you effectively using their assets to subsidise your mortgage? That's a big gamble as you just don't know if their share of the house will be worth the equivalent of another investment.
And it could affect their tax situation in their 20s.

You don't know if they will need help from the Trust when they are over 18 - which is just in five years for your eldest. You don't know if they might need specialist medical care, or if the want to get married before they are 27 and have a flat/house of their own - which would have been available if the trust had continued, but you won't be selling your house for at least 14 years. They might have a fantastic business idea that needs capital but again that won't be available. YOu are also putting yourself at risk. What if your house sale isn't enough to cover their repayments and provide you with a suitable home in 14 years time? Someone is going to lose out. Also, its not like you are investing the extra money - its to subsidise your living costs. While that might be nice and ease a few burdens, its not what the inheritance was intended for. Surely having paid off £167k on a £300k mortgage - you will have eased your mortgage burden by more than half and that will give you some time to really think about getting the best deal for your children. Firstly as many say... now that your mortgage is virtually halved, you can negotiate a better deal for the remainder.

There are too many risks involved and too many variables and unknowns. I don't think it is the best way of dealing with their inheritance.

That really wasn't the intention of the settlor, was it? At 27 for the beneficiary to own a proportion of a home that will be tied up until it is sold. OP would have to pay the trust rent!!! This really wouldn't be acting for the beneficiaries, but a solution to her own personal financial issues. The grandmother really should not have appointed someone with this mentality as a trustee

So long as you absolutely ensure that they get their inheritance at 27 I think you should do it.

you'll not only improve their quality of life not but you’ll be in a much better position to support them through university and therefore ensure they’re set for life.

My parents had a similar situation (much smaller amounts) and wanted to use my trust money to pay off their mortgage, they weren't allowed to. I think if asked now they'd still be annoyed as from their point of view we'd have had more security, holidays and so on.

Privately I'm very glad of that as they're still living in the house the mortgage was for, and there's no chance in the world I'd see them sell their home/our family home for any amount of money I was owed.

I hate to say it but in some (a very few but important) ways there is no substitute for cold, hard cash - that's what they'll need to pay for things they want and need in future. A few years of a less stressed mum and more guitar lessons just isn't going to compare to the prospect of buying their own flat in the future rather than spending decades paying rent.

If your mum had wanted you to have this money now she could have left it to you, I'm sure she knew you had a mortgage etc. She wants them to have the money.

I'm sure property is a wise investment and if you were asking whether to use the money in the trust to buy a separate property e.g. a buy to let flat, you'd be getting different responses. YOUR property is not a wise investment for several reasons:

• what if you are ill or otherwise unable to move when the time comes?
• what if one of the children wants to sell but the other one doesn't want to
• what if you have a new partner or even other children? another child would "deserve" a share of the house too
• what if something goes wrong with the house and insurance pays out - you'd get all that money and the value of the house would go down

Your heart is clearly in the right place but what your children deserve both legally and morally is that money your mum gave them.

A friend of mine did something similar, OP. It was fine. Kids all got their inheritance, and they benefitted in the meantime.

YADNBU

I think it's a very sensible and economically savvy way to maximise financially for all of you for the not only now but the long-term future.

In 15 years your house will have doubled in value (at least), so you could quite easily downsize fairly comfortably and pay them off.

At the moment, the money is sitting there doing absolutely nothing and will be worth a lot a less in 15 year's time.

But don't get re-married and complicate/loose the financial strength in your position.

A friend of mine is in the same position but renting. Single mother and really struggling.

Her DD has been left £300K. IF she could invest it now in a property for her (and obviously have it all tied up in her daughter's interests) - in 15 years time, her daughter will be laughing all the way to the bank.

As it stands (like in your position) it is doing absolutely nothing and it's value will be so much less in years to come. Hard to realise, but It's a question of simple maths, looking back at monetary value over years/decades and having a good grasp of property market movement/history.

"At 27 you have a conversation with the children"

DON'T wait til they're 27 to have this chat if you do take this mad course. "Hi kids btw I know you left school 10 years ago but here's when I'm choosing to tell you that in fact you owe half of this house between you. Do you want me to sell up?"

People make long term financial and career decisions based on prospects. I'd make quite different ones if I knew I was getting £100k in a few years time, e.g. I'd be planning to buy a property.

Don't touch the money. It's your children's, not yours. They'll need it to buy houses later.

So at age 27, OP sells her house to distribute to the beneficiaries? What about the other beneficiaries? A trustee MUST act without prejudice between beneficiaries. One beneficiary has their share tied up in a personal illiquid asset in an individuals name, while the other beneficiary has their assets invested in a liquid, realiseable portfolio. Call that acting without prejudice?

You've misunderstood completely. Op and her siblings have received their inheritance, there was also money left to ops children. It's the children's money op is considering. It makes no difference to ops siblings as the money isn't theirs in any way.

We'll, it's their inheritance not yours so I don't really see how you can do this unless you also make them owners of the house.....

@MyStarBoy I actually think that's a bit different, she could potentially buy a flat or house entirely in her daughter's name with that money. That way she entirely owns a property and that's much less complex. The daughter could choose to sell it any time or just continue to live there and the mother could move out later.

The OP isn't the same as each child will only own 1/4 ish of the house so the mother owns most of it and each child will have very little say.

At the moment, the money is sitting there doing absolutely nothing and will be worth a lot a less in 15 year's time

Huh? Investing 137k, even low risk, will make it worth a lot more than that in 15 years!

The trust fund could pay for university outright! No need for mum to make things more complicated legally.

No.

Only thing I think could work is if you borrowed the money from the trust to pay off your mortgage, then paid the trust a lower rate of interest than you are paying now. Only issue with that is how good would you be at paying it back or would it be tempting to say I won't pay back this month as we're going on holiday.

If you're not happy with the rate of interest the money is getting at the moment then look around. I've got some money in a fixed 1 year ISA at 4.something%, some easy access at 3.22% and a monthly regular saver at 7% and another at 6%, plus a vanguard ISA which is currently sitting at 20% returns.

I think its fine so long as its done openly and above board. You set the value of the house now and they get a % in its increase in value over time (commensurate with the amount of "equity value" represented by their contributed funds and they also get a rate of return for your use of the cash in the interim. At some point you may have to refinance or sell the home to pay them out their equity though so you have to decide if its truly worth it. Otherwise buy an index fund for them to keep it all seperate.

Yes, and the choice is not binary; leave it in cash at a low interest rate or use it to plough into OPs house.

2 separate issues here OP that MUST be gated.

1. You are failing in your duties as a trustee. Seek professional financial planning advice on how best to invest the trust assets.
2. Your mortgage higher than it might need to be. Seek mortgage advice in your capacity as a home owner/mortgage payer.

The two cannot be linked here for so many reasons.

Even then, this would not be in the interest of the beneficiary. What sane person would invest heavily in a single debt instrument where the debtor was a single, private individual?

Have you asked the kids ?

Can I ask how your mortgage increased so much?

What rate are you in at the moment and for how long are you tied in?

Yes it looks like you have no option to use that money and I suppose your mother would want your children to have a home and as good life as possible

also hope you are divorced and that your ex has no claim

disgusting man doing that to his own children

The kids don't have capacity to make such decisions, that's why a trust was created where trustees look after the money for the beneficiaries.