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.

Trustees must comply with a range of duties, some of which will be set out in the document in which they were appointed (known as the trust deed) and some of which are automatically imposed through laws passed by the Government.
As a general rule, a trustee must:

• act in accordance with the terms of the trust and follow any specific orders that they have been given;
• ensure that all trustee decisions are made unanimously, unless the trust deed provides otherwise;
• keep clear and accurate accounts and records relating to trust business and ensure that copies of these are made available to any beneficiary who requests them;
• always put the interests of the trust first and show honesty, integrity and loyalty to the beneficiaries they have been appointed to protect;
• treat all beneficiaries equally by acting impartially and without bias – a trustee must not do anything which has the effect of promoting the interests of one beneficiary at the expense of another and must balance any competing interests that exist; and
• ensure that, while managing the trust to provide an income for the beneficiaries, care is also taken to preserve the capital value of the assets over which they have control.

Rights of beneficiaries As a beneficiary, you have the right to expect appointed trustees to comply with their duties and to ask questions of them if you have reasonable cause to believe that something may be wrong. You are not entitled to be consulted on every decision that is taken, but you are within your rights to ask why certain decisions have been made and to carry out checks and request key information in order to ensure that the trust is being properly managed and administered and that your interests are being fully respected. Where no breach of duty has occurred, there may be nothing that you can do formally to address an issue that you are unhappy about. However, it may be possible to open up a dialogue with the trustees in which your concerns can be discussed and efforts made to find a way forward that is acceptable for everyone involved. Where a breach of trust is established, you will normally have six years from the date of the breach in which to issue court proceedings to obtain redress. Sometimes different time limits apply, for example where the breach was concealed, if an affected beneficiary is under the age of 18, or where you believe a trustee is guilty of fraud. Your options where a breach of trust has occurredWhere there is evidence to show that a trustee has acted in breach of their duties, or is otherwise unfit to continue in their role, then there are a number of steps that you could take. These include:

• asking the trustee to step down so that they can be replaced by somebody more suitable, like a lawyer or an accountant;
• asking the trustee to take professional advice so that they have a better understanding of what is expected of them and so they can be supported in carrying out their role;
• asking the trustees to collectively agree to meet with you and your legal representative in order to discuss your concerns and the possible means by which they could be allayed;
• asking the trustees to collectively agree to the appointment of a mediator who can work with you to try to find an acceptable way forward and reduce ongoing tensions;
• asking the court to give directions about how a particular issue should be addressed and any steps the trustees must take to comply with their duties in the future;
• asking the court to hold a trustee personally liable to recompense the trust (and by implication the beneficiaries) for any financial losses that they have caused; and
• asking the court to formally remove a trustee and appoint an acceptable replacement.

Sorry about the long post, but OP, if I were a beneficiary of this trust, I'd be having you removed.

Just sort out the mortgage having other options means your putting your energy into that not actually sorting out your kain issue which is a money sucking mortgage

What if your home got repossessed. It would all be gone

Also my mortgage is £100 more than yours and I owe nearly £400k

If this was me and my mum, I'd want her to do this. It makes perfect sense, why should the bank basically take all your money, when there's an obvious answer to it all there which benefits you all massively!

It gets rid of the shoddy mortgage, and if the money was taken legally as a loan from the trust then it could be repaid with interest, which means the children's money continues to grow until they're 27. And it gives you all a better quality of life in the meantime, it's a no brainer.

BUT I'd only do this if it was proper legal arrangement, and if there was no way in a million years that ex could lay claim to it, if there's any ambiguity in that area then DO NOT risk it, don't assume it's safe as it never will be. Either way you need to sort out that mortgage.

I think the people saying no, just see it as you 'stealing the inheritance' which isn't the case, it's making that money work harder, EVERYONE should make their money work harder for them, not just sit back and let the banks and government take it all from you like sheep and wonder why you end up with nothing at the end of it all!!

My siblings and I had a discretionary trust and dad paid all our private school fee’s from it.
he could also spend money for the direct benefit of the children.

So in principle I dont see a problem now as increased income will benefit your children. Problem comes with Selling the house but as prices were very much unlikely to be lower in 14 years this will be an emotional risk more than a financial one

Why on earth would the home get repossessed if the house was mortgage free?

What about the other beneficiaries? They have their share in liquid assets whilst OPs son is tied up in a leveraged asset? In what way is that discharging her trustee duties appropriately?

Indeed.

iIts clear that neither you nor the other Trustee - your best friend - are sufficiently objective enough to be trustees. You see your DCs’ money as somehow yours, as part of your domestic budget. And the way that you present the issue could be read as benefiting you, not your DC. Making your life easier - holidays, treats etc.

If you’ve had to cut back because of the DCs’ father’s appalling behaviour, we’ll, that is what the trust fund is there for. Not to invest in your house!

Other debts, care costs. The cost of doing this, even if permissible, which i highly doubt would be prohibitively high.

I don’t think it’s an obviously ridiculous idea. It would clearly use the assets to benefit the children but I’d be more worried about how short term it is for you. You would be freeing up your income from putting it into a long term asset in order to spend on consumables right now. When you come to sell and downsize to free up the children’s share you might not have enough to house yourself and almost certainly won’t have much of a lump sum as most downsizes do. It’s a short term gain for you, not a good long term plan for financial stability.

You also have the issue of what to do if it would be in the interests of one child to have access to their money earlier - for uni, say - while the other is best served continuing to live in the family home?

From the other things you’ve posted it does sound as though you aren’t very financially savvy. 167k shouldn’t be sat around earning almost no interest. Most of it should be invested in vehicles that will likely maximize return and still give reasonable access over the next 14 years, especially for, say, the uni years, when it might make sense to use the trust fund instead of borrowing. And, as others have said, your mortgage sounds unreasonably high, so looking at what you can do there would be good, and potentially using some of the trust fund for activities, etc. for the kids might also be good, though I can see why you’d want to preserve the majority of the capital for when they’re older.

All in, I think you need to look around a bit more at options. It maybe that paying off the mortgage is the right move. But it doesn’t sound like you’ve looked at all the options and that’s not in the spirit of your position as a trustee. Don’t let the panic over the sudden increase in costs push you into a solution that will come back to bite you in a few years.

If I were a beneficiary, once I reached 18 I'd be suing you for the money plus interest/returns.

So long as you can tie up the legalities properly, @Youknownorhing (and particularly ensure that the children's father can't go anywhere near that money), I'd do it like a shot. I did do something similar, and have subsequently paid the money back into the DC's accounts. Being able to use their money when I did meant that they could stay at their (private) schools, in their home etc.

Basically, OP. You have been appointed as an objective custodian of the money. This would be little different to a stock broker investing client capital into their own home. The stuff about security for the child is a bit of internal justification for a shocking dereliction of duty as a trustee.

But its not even the children's money, it is the assets of a trust. It might sound like semantics but its fundemental. The OP was appointed as the settlor deemed her "trustworthy" which she's proving herself not to be.

There are a lot of assumptions here. I "invested" in the stock market and it did much worse than it would have done in property. Investing in the stock market is also a gamble, there could be another Great Depression coming for all we know.

I also wouldn't feel guilty for my mother happily downsizing once I left home.

So investing in a single leveraged illiquid asset of a struggling single debtor, where disposal is at the sole discretion of the holder is a more prudent investment than an portfolio of investments, advised by a qualified professional?

This is their home and they do not want to move.
What an absolute nonsense, children dictating whilst you live on a shoestring, £400k house isn't a necessity.

But if done legally a proportion of that property will always belong to the children, and can't be touched for care costs as it's proven where the inheritance investment came from, but it would all have to be legally done, but makes much more sense for the money to be earning more, rather than sitting there while OP gives the bank £1400 a month for nothing.

"So investing in a single leveraged illiquid asset of a struggling single debtor, where disposal is at the sole discretion of the holder is a more prudent investment than an portfolio of investments, advised by a qualified professional?"

Where was it stated that the disposal is at the sole discretion of the holder? A legal agreement with a payout mechanism (refinance, sale, etc) is perfectly appropriate. I've seen stockbrokers aka "qualified professional" lose all their client's funds. Handled openly the investment in the house is just as good and in many ways better than many other "professional" options, IMHO.

If your so poor you don’t live

sell the house and buy a smaller one?!?!?

To add, this is why parents being trustees is a bad idea.

Yes, I was going to say this.

It's an old fashioned romantic notion that money can be put in trust until beneficiaries are x age, it cannot. The trust can be dissolved if all beneficiaries agree when the youngest reaches 18 and assuming they are both of sound mind.

There's case law on this.

I’m not a lawyer but it should be perfectly possible for the trust to own a share of the property.
Say op owns 60% and the trust 40%
when eldest is 27 house sold, trust pays out 20% to eldest and retains 20% for the younger.

Even if it is permissible, which i doubt, I'm pretty confident the mortgage company will want to retain first charge over the entire home. The OP will reduce her mortgage balance but not pay it off entirely. This means that she becomes insolvent, the asset has no value. The son will still be entitled to a share of the trust so the other beneficiary loses out too.

Plus, the fees for solicitors would also make it a shocker for the trust. I mean, if it costs £5k, that is 3% of the value gone.