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.

And 5000 a year interest is a huge amount! 10 years and that’s an extra £50,000

sp if your children are 11 and don’t get the money till they’re 27. That’s 16 years. Which adds £80,000

I would be concerned that you could again be screwed over by an unscrupulous future partner and the money could be lost for the kids.

Initially I was all for putting it in the mortgage, but once it’s out the trust and is being used for that there are so many more risks for the kids in terms of that money being inaccessible when needed. It does make sense in freeing up finances now and as long as you paid the equivalent (well invested) interest into another savings account for them, ensured the bare minimum they got back was what they paid in (so you take the hit for any price decrease in the value of the property). Their share was kept separate and they owned that percentage of your property. They can take the money out at any time and you would not begrudge them for it, so for study, buying their own house etx. You would have to remortgage etc. Morally it seems fine.

i just think you need to think hard about how you would actually feel if they said they wanted it at say 19 and you then suddenly had to start paying mortgage repayments again. Would they even feel like they could? They might feel guilty for asking. Things to consider.

As everyone else said, get legal advice make sure no future partners can get a stake on it. Also worth getting legal advice before living with anyone and especially if you ever remarry. You need to check your kids don’t get screwed over if you remarry, die and then the new husband inherits your house, then they die and leave it to their kids and yours get nothing. It happens, so worth protecting yourself and your kids from it.

Last point, as others have said. Do you have a consent order? Are all your financial links with your ex cut so he has no future claim on your finances?

I think that a trustee agreeing to "lend" the money they are meant to be taking care of to themself is probably on dodgy ground.

I understand how this looks like a solution to your problems, but when you consider that money, you are meant to do so from a perspective of the best interests of the people who own the money, not how you can benefit from it.

But I guess the answer is to get proper legal advice.

Well, would the trust be a joint owner of the home? What if OP cannot move? Objectively its a shocker. OP is backfilling justification rather than seeing her role as trustee as her responsibility to do the best she can for the trust assets and ultimately BOTH beneficiaries.

Absolutely @Everanewbie and @DollyParkin
Neither of them see you have a clue what a Trustee is
OP seems to think she can do what ever she wants with her kids inheritance.

What is it that some parents ( quite a lot it seems ) think they can steal from their kids. Not only steal but go against their own parents wishes.

No you can't take their money.

The reality is that you can't afford to live in your current house and you need to move.

Furthermore, an investment via an FCA authorised firm would carry certain protections such as access to FOS in the event of a complaint (i.e. inappropriate advice leading to losses) and the Financial Services Compensation Scheme against institutional failure. But you knew this, so lets chuck it all in OPs house and pretend its less risky than seeing a recognised chartered financial planner and actually discharge her duties in the interest of the trust rather than herself.

It’s your children’s inheritance not yours, leave it alone. If you’re in a £400k house and things are that tight, downsize to a £300k house.

My friend is a mortgage advisor and when I’ve just told her she was aghast. Even with all of that you should change.

you need to get a new one and Redo a deal. I would even go so far as to (if it’s true which seeing as OP hasn't come back since being called out). Then contact the financial authority and say you’re being done out of money. They’d want to know for sure that a 150,000k is costing you £1400a month. Even a 400000k would cost that!!

bad deal.

No not a good idea. The money is not yours to use, it is your children's. What happens when the kids are older, want their inheritance and you are still not on your feet.

Bottom line best advice.

Having done a bit research I am virtually certain, OP that you'd fall foul of the Trustee Act 2000, on pretty much every point of the legislation.

@BungalowBuyer

Of course the kids are old enough to own property - a newborn can own property if it’s put in their name.

As long as they are added to the deeds as co-owners, and you write up an agreement lodged with the trust’s solicitor that the house will be sold by X date so they both get their money back, I can’t see there is an issue. It gives them a better funded childhood so it is to their benefit.

I am assuming here that you will check the property will increase in value at least an average amount, and have some plan in place that in the unlikely event of illness or the more likely event that one of them wants to go study in the states or something, you will have a option B to release.

You're a trustee, and what you propose would also have a significant benefit to yourself. You can ask Mumsnet members for moral advice and guidance, but they can't tell you what's legally right or wrong within the conditions of the trust that you are trustee of.

You need to speak to a solicitor, and have someone independent of the decision needs advocate for the children's future and legal rights in relation to their inheritance.

If you don't get this right you know it's going to come back and bite you later. Every teenage argument is going to bring up how they bailed you out.

This isn’t that unusual but you need legal advice and the key aspect is that the share of the house that you use their inheritance for is placed into a trust with the same terms. And when they are allowed the money you have to sell and give their share back, so if you own 40% you pay them 40% or what the property sells at.

Any outstanding mortgage etc comes out of your share not theirs.

The OP would break the law. Trustee Act 2000. No regards to diversification or the other beneficiary.

But to be clear - you need legal advice.

A big problem here is that the will was set up with a trust without explaining properly what the trustees' responsibilities are.
We have been in a similar situation in the past couple of years. Literally landed on us with no prior warning. Really fast learning curve!

Trustee duties are statutory. Trustee Act 2000. Investment principles are as follows:

When selecting investments the trustees should act in the best interests of all classes of beneficiaries of the trust. In England and Wales, the Trustee Act 2000 introduced a statutory duty of care for trustees. This includes a duty to apply the 'standard investment criteria' and a duty to obtain proper advice when making or reviewing investments.
The standard investment criteria requires that trustees ensure any investment proposed is both suitable for the trust and where appropriate it has regard for diversification of investments. The standard investment criteria can be overridden by the trust documentation, for example the trust may expressly state that the trustees do not need to consider diversification of their investments.
The trustees must also review the investments on a regular basis to ensure they remain suitable for the trust.

Not sure how bailing out OPs mortgage fits the investment criteria.

I think there's quite standard rules for trustees

Because she’s still married and the ex could come back and remortgage it again or facilitate a sale, asset sharing etc. she hasn’t exactly been wise to his prior antics, and even asking this question demonstrates to some of, how lacking the OP is.

For the kids sake, I’d be making sure the ex couldn’t get his hands on this money.

I can’t understand why people are so against this? Your children would get their money at the same time as if it were in a bank, and their quality of life would improve now. It’s in their best interests that you borrow the money…literally win-win.

I'm trying to work out how a monthly repayment of 500 goes to 1400 on a 150k mortagage. Surely that's double digit interest rate territory?

There will be a way of doing this but you need good legal advice. It’s a very sensible idea for everyone so long as done properly