Protecting my children’s inheritance from me!

[Bundlesmads]

I am probably due to inherit enough money soon to be able to buy a house.

Problem is, I suffer from mental health issues. Normally these are well managed and I can make good decisions. However there is always the possibility that they may flare up and in those circumstances I can make bad decisions particularly in regards to money.

My DH is around, and although generally lovely is pretty clueless as far as money is concerned.

I would like to purchase a house in such a way that it was protected from bad financial decisions on our part. So I am thinking that maybe some sort of trust so we need the permission of a trustee before taking out loans on the house or selling it.

Is there some sort of established model we could use for this? Also, as far as trustees go, I have considered my brother but I would worry about souring our relationship especially if I behaved badly during a MH crisis and tried to pressure him into releasing money. I don’t think that would be fair on him. Are there alternative options for trustees like solicitors who are more removed? How could I be sure they would still act in my children’s interests?

I'd speak to a solicitor but I think that should be easy to set up. I think it's a great idea to use an independent person as a trustee.

Thanks JoJo. I know the chances are remote, but I do worry about the chance we might end up with a bent solicitor who would do something like sign off a loan in return for a kickback because they didn’t have my children’s interests at heart.

Perhaps having a few trustees might be better? My brother, a brother in law and a solicitor? That way any decision would need all three signees?

Are you dead set on investing the money in a property? In places like a pension or a junior ISA you wouldn't be able to touch it.
In a pension, you could get the money when you retire and would be allowed a tax free 25% lump sum that you could then give yo your children to help with their house deposits for example.
In case of a junior ISA, your children could access the money at 18 so good financial education + earmarking the things for sth, e.g. uni or house could keep them sensible.

If you go down the property route, I'd probably not involve your brother as a trustee as you wouldn't want to spoil family relationships.

Would you still need a mortgage if you bought a property? Do you really not trust yourself at all to be half sensible?

Go and see a financial adviser.

You sound incredibly sensible!

Definitely dead set on a house. I have looked at the option of pensions or savings accounts and at the moment both would mean that the money was depreciating and it might mean the money I inherit would not have the same value when it was passed on to my children.

I’m not bothered about passing on cash, I just want my children to have somewhere secure to live.

If we buy a three bedroom terrace then it’s pretty much guaranteed when we die they will have at least enough money to buy a small property somewhere outright if they are skint, or put a deposit down somewhere nice if they are lucky enough to be a high earner.

Thanks Stormy, when it comes to it I will.

JoJo, I definitely don’t trust myself to be sensible. I have an MH problem which if it flares up badly I could spend the lot in a year. It is from my Gran and she is not a rich person but she has worked really hard to leave her estate to her grandchildren.

I would really like to reassure her it won’t be wasted by putting a plan in place before she dies

Also JoJo, it will be tax free anyway as it won’t go over the inheritance threshold.

Do your dc have godparents? Maybe they would be appropriate trustees if so.

Perhaps the Money Saving Expert website might have some advice. Martin Lewis is informed about MH and financial decisions and IIRC instigated a campaign around the same.
You sound really sensible and self-aware. Good luck.

My kids Godparent are our siblings apart from two others who, much as I love them, I wouldn’t trust as much,

It’s a really good idea to get something set up - my DP has bipolar and when she’s showing signs of mania I lock her bank card and change the passwords to her online banking and PayPal. It’s tough on both of us but it’s worth it when she comes out the other side and realises just how much only she would have spent if able.

Would your grandmas solicitors be able to help? Or your bank?

See a solicitor one option would be to buy the house in your kids names but you having life-long tenancy. Or them and you having shares in it.

It wouldn't be without issues and would need to be worded properly but you also need a get out clause if you want a flat for health reasons.

Remember you could be in your 90s before you die and your kids into their 60s a lot can change in that amount of time.

I wouldn't touch junior isas. They get handed over without any restrictions. So 16yos getting wads of cash are likely to blow it on junk in months.

If the grandma is still alive, then she could set up a trust for her grandchildren. However, it's worth thinking about care fees - if she ever needs to go into care, the property would legally need to be used to fund that.

I wouldn't touch junior isas. They get handed over without any restrictions. So 16yos getting wads of cash are likely to blow it on junk in months.

Its 18 not 16 and this is a massive generalisation, and insulting to most DC who are sensible by 18, esp if they are involved with money investment as they approach that age. I know a lot of 18-20yo, and don't think I could name one that would blow it on junk in months.

My DC already had S&S ISAs when they inherited a significant sum 2 yrs ago. DS was 18 and is now actively involved in topping up his ISA, with the remainder in various accounts/bonds to drip feed each year. Far from blowing it, he has actually added money to it from PT job.

DD is approaching her 18th and has similar attitude, doesn't want to touch what will be a significant house deposit.

Education is the key and their understanding that once spent, a large amount wont get replaced. It has also made them appreciate money generally I think, seeing their investments grow, so being careful with what they earn from PT jobs.

I have looked at the option of pensions or savings accounts and at the moment both would mean that the money was depreciating

Savings would, but not investments if put into S&S over long term. Ours have been invested for 18+ Yrs and have appreciated much more than our house over a similar term! Some funds have grown to 5 or 6 times original investment. As long as money is drip fed monthly and spread across funds, it should not depreciate long term.

Will the house be lived in by your family or rented out? Its not obvious from your posts. If the latter, you need to look at costs of not being your main residence, including CGT when sold, plus costs of renting out.

What you want to do is create a trust for your children.

Thanks for the advice everyone, really useful. maitlandgirl, exactly our problem! There will definitely be no care home fees as Gran is terminally ill with cancer and is adamant she wants to die at home so the family are going to make sure she has what she wants.

I spoke with my Mum by email last night about this and we are going to look at trusts and a lifelong tenancy is an option I will look into.

Problem with a tenancy is that it would be your kids you were putting pressure on in the event that your condition flared up. I think having a trustee is sensible and a bent solicitor is unlikely! Especially if you warn them of your condition and have it in writing that the house is in trust for th kids and is not to be sold for your benefit.

If you have a solicitor as a trustee, just remember they will charge trustee fees, will you have enough spare cash to pay these ongoing charges?

My DDs inheritence was initially held in trust by my cousin's solicitor (as executors, since there was no other arrangement in will). Fortunately, as she was the only beneficiary under 18, but already 16, they suggested transferring trusteeship to DH and I. They did point out that there would be significant fees if they retained the trusteeship and it would deplete her inheritence.

sophiesdog, thanks. I am thinking maybe my brother and a BIL as trustees.

Also brie, really good point about the tenancy and I think that rules that option out.