Higher mortgage to pay off siblings future inheritance

londonhousebuyer

Hello
I am about to buy a house with my partner and with my elderly mother who is in her early seventies.
We are buying the hopuse together because my mother is unhappy where she is and she is too old to live on her own. By living together, we can therefore look after her.
The house costs £284,000. My mother is putting down £123,000. My partner and I are making up the difference (i.e.£145,000 mortgage + approx £16,000 deposit. We will also be paying to build a new bathroom and/or a new extension, as my mother will be living downstairs and has mobility problems.
When my mother passes away she would like to leave an inheritance for me and my four other siblings. She would like to leave me more than the others as I will be looking after her.
It has been suggested that she divides her current equity by five and gives me an additional £10,000 as a percentage of the total. ie. £123,000 minus £10,000 equals £113,000 divided by five. My siblings are pressurising me to accept to pay them there £90,400 (£22,600 each) plus inflation (currently around 4.5%). They would also give me 3 years to pay them off. Anything left over in the equity of my mother's house will go to me after aying them this sum.
My partner and I are very worried, because of the unpredicatability of this and if my mother passes away in the next few years and we have a child or two by then, it would be extremely difficult for us to pay them off without selling the house (even with the three year grace), not to mention the cost in time, money and stress of moving.
I do not object to paying my siblings what is theirs according to my mum's wishes, however they have not been sympathetic to my concerns and have forgotten that I am looking after my mum.
MY partner and I are now thinking of "vreative" solutions to pay 2 or 3 of them off now, i.e. increase our mortgage by £40-60,000 thus allowing my mum to release some of her money to pay them £20K each now. Our joint salaries are about £42,000 (inc overtime) (about £2,300 per month after tax). The increased mortgage would be about £1,200 per month. We also have some more savings for contingency (about £10,000 which we would use in the above case. I am also concerned about the need to reserve some money for when we start a family or if there is an emergency or there is need for urgent repairs.
What would be our wisest move to minimise our risk? Try to pay some of them off or accept paying them their share plus inflation? or something in between?
I could also make a compromise with them on the inflation, ie say I would only pay them for the first five years or during the three year period above.
I would be really grateful for any of your views or other possible solutions.


Many thanks
londonhousebuyer

arthur_dent_2

As I always understood it, inheritance was not payable until after the death of the person. Also house prices and thus both your investment and mums investment are liable to any ups or downs in the housing market. Mum could have 20 years left yet! If/when the time comes to pay out your siblings inheritance it should be worked out accordingly then and unfortunately for you they will have to be bought out. Circumstances can change dramatically in only short spaces of time, I hope to one day inherit a little money but I am certainly not asking anyone for it before they have died and I am not trying to work out how I am going to buy people out when the time comes. Much admiration to you for looking after your mum but let her live before worrying about the fact that you will have a debt to pay when she dies.

pennypinching_2

I would propose not to pay the inflation but look at the the value of the house compaired to when you brought it. I would also deduct any money that you had spent on it in the time that you live there. I think they are being fair with the 3 yrs because this gives you time to look at your situation as lots of things could change in this time, you could look at down sizing or remortaging depending of course on your situation.

olly300

As Arthur Dent pointed out inheritance is not due UNTIL after someone is dead so no money should change hands until that time. Therefore your mother should be asked to write a will reflecting the circumstances and should be asked change it when the circumstances change i.e the extension is build. Make sure a solicitor is used to write the will and any changes. Paying a few £100s is better than a family argument.

londonhousebuyer

Dear Arthur

Thank you for your wise words, I will certainly consider what you said and accept your comments, but I am still worried about potentially having to sell the house in the future and the difficulties this will cause. I therefore have to be pragmatic and try to minimise the risks.

Best regards

londonhousebuyer

mr218

I am sorry but your siblings are having a laugh. what about the costs for taking care of your mother. have you considered that she might need to go into a nursing home. all the costs for that will be borne from the sale of her house.

essentially your mother is giving your 123,000 pounds now. for that you are going to take care of her, provide her food and accomodation and nurse her when she needs it, apart from all other bits like tv, internet (if she uses it) , holidays etc.

while it seems a bit callous to estimate it this way. she might live for 20 years as arthur dent said. that works out to 6000 pounds a year without inflation. even if she leaves no inheritance to your siblings you are actually getting 6000 pounds a year to take care of her every need. that is not much is it. you are doing this because you love your mother and at this point pooling your finances helps you to buy a house. but you will be paying a lot more than that over the years.

your siblings are not estimating the cost of caring for her. seems to me that you need to get some estimates of how much it will cost if she goes into supervised housing. get the costs and tell your siblings, this is how much it is. your mother wont be happy either because she wants to leave some money to her other children. basically it is a choice of who will be unhappy , you or your siblings and your mother.

i think if your mother is going to live with you, then you need to come to an arrangement with her and your siblings about how much it would cost per year for you to keep her at a level which makes her happy. then basically, (i know it sounds dreadful) if she is around for 10 years or so, you multiply this yearly cost by 10. subtract this from 123K (adjusted for inflation). Divide the remaining by 5. keep one portion for yourself and give them the rest. that is a fair way to do it.

otherwise dont do it unless you are willing to take care of your mother at a cost to your pocket. but that will cause you resentment. otherway around might cause your siblings resentment but they have not considered the cost for taking care of her even in good health.

Doozergirl

Have any of your siblings noticed that your mother is alive?

I can't believe the audacity of it! Your mother needs somewhere to live and she needs money to pay for it, which she has. Just because that house is shared with you, it doesn't mean that they should be jumping on their high horses and deciding that you are benefitting somehow and that you owe them something.

Would they like her to go into a home? Perhaps she should sell her house and the inheritance can be used to pay her fees?

There is no inheritance, the money is not subject to inflation at all as it depends entirely on your mother's share of the house and it's value when she eventually dies. You don't owe anyone anything. Why should you care for her, take on debt and pay interest and inflation on that money when it is clearly needed to house your mother who is very much alive?

That said, I can't think of any creative solution except that your mother keeps her will up to date, you save as much money as you can and when the time comes you address your finances and see whether you can afford to buy the house outright or indeed, sell it.

She could be going for ages yet! My husband's granny lived to 101!

nearlyrich

I think this is a really sad situation, I bet the siblings demanding their "inheritance" now have no idea of the reality of looking after an elderly parent.

I am of the opinion that no-one has a right to an inheritance and it seems a bit calculating to be doing a deal whilst Mum is still around.

If the OP and her partner are prepared to put their life on hold to look after Mum their home should not be jeopardised by grabbing siblings just out for the money. It's typical of an elderly person to want to be fair to all her children but are the children all equally prepared to do what the OP is prepared to do?

mrs_deadline

To quantify the risk your family is expecting you to take on, you should explore with your mother the cost of a life insurance policy to cover the amount in question. (Also, the expense might make her reconsider how badly she "wants" to leave inheritances of that size...)

Catblue

Agree with most of what has been said here. Do not be pressurised at this point and do not agree to any payment until such time as your mother passes away.

You must be very clear with your siblings and your mother about the reality of the situation.

Work out exactly how much the extension and bathroom will be costing (because if your mother would not be living there, you would not incur these costs). Factor in costs for furnishings, decoration, special fittings for people with mobility problems, etc. You may be able to get a small grant from the council to help with this. Ensure that this money comes off your mother's £123K.

Your mother will also need to determine how she is going to pay a reasonable amount for utilities, council tax, food etc.

When your mother has taken all this off the £123K, then your mother can think abut splitting any remaining money in her will. My guess is that she'll be needing this money to live on.

I would also find out the costs associated with a carer/home help for your mother in the event that someone needs to come in to look after her while you are at work.

You need to be very clear at the outset with all parties. Your mother may became a bit confused later on and everyone has to know what was agreed.

If your siblings kick up a fuss, explain gently that you would be very happy for her to live with them instead of you. Show them how you have worked out the costings and wish them the best of luck.

angel_eyes_3

I don’t know the practicalities of this, but just as an idea.

Your siblings seem to want to fix their inheritance at the amount of money your mother has now (plus interest). Not how much your mother’s portion of your house will be worth in x amount of years when your mother dies.

As suggested work out how much it would cost your mother to remain in her own home paying carers to come in, and for any modifications needed to her house in order for her to carry on living there. Also work out how much it would cost if she deteriates and either needs additional care or to go into a nursing home.

Instead of buying the house with your mother, could she loan you the £123,000? You would then pay her back a small mutually agreed amount over a long period of time.

Obviously as you are paying your mother the money back, she doesn’t have a stake in your house and her name is not on the deeds, but by the end of the term of loan she will have the money back in her bank account. Interest can be negotiated between the 2 of you, taking into account how much your mother would get if she invested the money.

Also as you are paying your mother back, you will not be able to afford the extension/ modification. As it is for her benefit, she could pay for these using the £10,000 she was originally going to give you.

Your Mother will now be living ‘rent free’. Using the calculations you did initially, work out an acceptable amount for her to contribute to her upkeep. You didn’t mention your mother had an income, if not this rent could be deducted directly from the loan. Therefore the longer she lives, the smaller the loan will become. Or if she does have an income, she could use that to pay her contribution, you would then use that money to repay the loan.

When your mother dies, 4/5ths of what is left of the debt will then be paid to your siblings (obviously you don’t need to pay yourself). Or if you have paid her back, they will receive a portion of what is in her bank account (1/5th each as you are now on a level footing with them). You will not get anything extra as you’ve been being paid all along.

It also means that if your mum changes her mind and decides to live in a nursing home, she still has that option as the capital is (in theory) still there. Or she may change her will and leave it all to the nearest animal sanctuary. It is still her money and her options are still open.

Hopefully if your mother lives for a long time, the house will have risen in value and you can borrow against the house to pay your siblings back the rest of the debt.

Hopefully this makes sense and someone else will come along and iron out the creases in this solution. The OP did ask for some ‘creative ideas’.