Good idea to use my dc inheritance to buy dm’s house?

[Billi80]

My dc is only 9 and is about to inherit money. Would it be possible to use this to buy my dm (her dgm) house via a trust fund? My dm (her dgm) is very short on money and would give her a bit of respite in her later years. As my DD wouldn’t have access to the money till she is 18 it seems a better investment than ISAs, etc. Or is this idea bonkers?

My goddaughter inherited some money from another godparent and her parents did set up a trust for her and they invested it in a property which was rented out. The accumulated rent built up very nicely even though they had to pay out regularly for repairs etc and she was able to invest in another property. It was all done through solicitors etc.

Your Mum would have to pay full market rent for it.

All the people harping on about your daughter needing to be 18 to buy a house obviously can’t read or don’t understand what a trust is.

And some people perhaps don't understand that in the UK you have to be 18 to receive an inheritance and that a trustee is required to act in the best interests of the beneficiary and not that of the trustee's mother.

Hi OP,

You could potentially do this if you don’t pay more than fair value for the property and after the sale your mother pays market rent to your daughter’s trust until the property is sold. But you just mentioned that she is going to apply for equity release. This complicates things massively as your mother will no longer own the entire house. Plus there’s the obvious conflict of interest.
So I guess you won’t be able to buy your mother’s house after all. Your mother will get the extra income from equity release (which is unfortunately such an expensive ‘solution’) and you’ll invest your daughter’s money in something else

I, and other friends, have our own homes in trust for our children now. You can change the assets in a trust.

There is no reason per se why a trustee couldn’t deem the grandmother’s house to be a suitable asset (if there are no problems with it - you’d have a surveyor check it, etc) to be trust property.

OP should talk to a lawyer about setting this up.

Why? If you are still living in the house, it doesn’t help you for care home fees and still gets taken into account for inheritance tax. Putting a house you intend to keep living in into a trust is usually a total waste of time and frequently ends up costing more time and expense than just leaving the property in a will.

I note that generally the companies who recommend this (bad) idea then charge thousands to set it up.

https://allanjanes.com/-Can-I-Give-My-House-To-My-Children-Implications-for-Inheritance-Tax-and-Care-Fees

The link above is to a solicitor’s page that explains better than I can why nobody should be doing this with a house they live in.

Having said that, there is no law against doing something silly with your own money / property. There are laws against misusing trust money in the circumstance the OP is in. She could say her mother’s house is a proper trust asset but in light of the massive conflict of interest and the fact that investing all the trust assets in one non-liquid asset is unlikely to be in the best interest of the beneficiary, if anyone challenges it, the OP could end up in serious trouble.

I guess you missed the bit where OP already knew this "to buy my dm (her dgm) house via a trust fund?"

You missed the bit where OP already knew this "to buy my dm (her dgm) house via a trust fund?"

Candid Hedgehog is correct. As I said earlier, it cost my cousin thousands to get out of a trust her mother had made.

According to another solicitor, there are actual FCA warmings against these sorts of trusts

https://wards.uk.com/news/living-trusts-the-reasons-why-most-of-us-should-steer-clear/#:~:text='Living%20trusts'%20are%20increasingly%20being,up%20then%20bitterly%20regretted%20it.

They can via a trust.
my 14 year old has owned this house since he was 7.

This isn’t the sort of trust the OP is looking at, though.

(I appreciate, Candid, that you are probably aiming this at LalaPaloosa2024, but as a post on its own it would be easy for other readers to see this as aimed at OP’s suggestion).

Yes, sorry - it’s only aimed at the ‘putting the house I own and live in into a trust’ idea.

The OP’s daughter’s money must be held in a trust until she turns 18 (at least - many wills say older, that’s perfectly legal, too) - the issue there is the legal obligations on the trustees and what investments the OP can make - both points having been comprehensively addressed previously, I won’t go into them again.

Yes given the advice above and having done some research this looks like the path we will take! There are child ISAs we have been advised to look into as well.

I mean junior ISAs. Am useless with the terminology but learning along the way :)

OP can you please clarify why the only income your dm receives is only what you give her? I'm really struggling to understand this as your in the Uk? Also if she is able to set up an equity release she must own her own home so has assets other own which provides her with a wealth of options

The annual limit for junior isa is £9000 though, so it would take a long time to drip feed an amount that would pay for a London house.

And have the mental capacity to do so which is a bit odd given that the OP says she has dementia.

why is she using all her money to fund care home costs? The LA can’t make her fund it if she doesn’t have the money, and they can’t force a house sale to pay if she’s still living there!

I think your mum needs some proper advice.

@Billi80
Why is your mum doing equity release to raise funds for your dad's care?
As long as your mum still lives in the marital home it is protected from being sold to fund you dad's care. If he doesn't have sufficient assets then the local authority should be paying or at least contributing to his care. The threshold for partial LA funding starts around £23k.

The father is in a PRIVATE care home. That is why the mother is paying for his care.

That’s fine but if they don’t have the money to fund it, that’s not a long term solution.

It should just be topping up the LA amount though? Not funding the whole lot.

if she is struggling to this extent then a more affordable care facility may be needed.

@HollyKnight
If the parents are living in the UK and the father has assets under £23k then the local authority will have to at least contribute towards the costs of care even if it is a private care home. If he has less than £14k they pay all and he will have to use his pension/s apart from a small weekly allowance.
Most care homes in the UK are private. Nearly all of the local authority run homes were closed years ago, sadly.
While the mother is still living in the marital home then the house is disregarded from his financial assessment.