Advice re: buying property from a trust

Homebuyer78

Hi all,

Not sure where to put this, so have put it in here as it seems more relevant to the sort of advice I am after. My mum wants to help us to buy a house, but due to issues of trust around my partner, she is not happy to just gift us the money from savings that she has - long story re my mum / partners relationship which I won't go into here. She isn't happy with a dead of trust on the house, as if sold, the money would come to me, and I could choose to then spend this however I wish with my partner's involvement, which she is very much against. What she has suggested she would be happy with is that she creates a trust through her accountant / solicitor who would act as the trustees from what I can gather, and administer the trust? I would then be the beneficiary of this money which would be paid out from the trust to myself once setup. She doesn't want any claim on anything, but is keen that upon my death, the money is used to help a local cause that she inputs to. She basically doesn't want the money reverting to my partner were she to outlive me, and has a benevolent side to her which is fair enough. The amount we are talking about is around £50k, so significant but not an enormous sum of money. Let's ignore any potential rights of grand children for now as that isn't on the cards. 

My question is around how this might impact upon mortgage options. From reading around, I can't seem to find any answers to my specific issue. We will be chatting with a broker in the not too distant future, but would rather be forearmed with some ideas. Questions that I have on my mind are:

1) Is a trust able to gift money with no attachments to a beneficiary? From reading around, it seems that banks will accept gifted deposits, but where there is a loan involved that creates problems? I have found some articles that suggest a trust can gift money, but then this sort of seems to go against the point of a trust in the first place as they are saying then they have no claim? 
2) If the trust is not able to gift the money, how would this work in terms of using it to buy somewhere? The trust will be setup with the stipulation that any money withdrawn must be used to buy property from what I can understand. If this has to be termed as a loan of money, then there is no requirement for this to be paid back except on death. My mother doesn't want any interest payments or the such, simply for the exact amount in the trust to given to her elected cause upon my death hopefully way into the future. 
3) In order to cover the bank / my partner against any untimely death on my part, we have considered taking out a life insurance policy to cover the amount that the trust is giving / lending. The life insurance policy would pay to a separate trust, and if I were to die the week after getting the house, this would in my mind clear the debt to the trust whilst allowing my partner to remain in the house - I .e. the payout from the policy would be protected from anyone touching it, and would go straight back to the trust to pay off the 'loan'.
4) This leads onto how do I prevent the trust from having any sort of claim on the property? As I understand it, once the money is paid to me then the trust does not have the ability to recall it unless the stipulations of my mother are met, which is basically when I die. Would the trust have any sort of second claim etc on the house purchase? To repeat, my mother doesn't want any claim on anything other than the money when I die. 

It's maybe a bit of a complex one, and please move to the mortgages section if more relevant there? Any thoughts from those experienced in the above? 

Thanks.

xylophone

Whether the loan is made to you direct  from your mother or through a discretionary Trust, (hardly worth the bother and expense of creating?) it is still a loan and the lender (mother/Trust) would have the right to take a charge on the property as security.
A mortgage lender might not like the idea of a loan and if  the arrangement were accepted, would  almost certainly insist that it ranked as a second charge after the mortgage.
You could consult a mortgage broker concerning finding a mortgagee who would look at the arrangement.
The loan would be repayable on your death - presumably you would  take out life insurance to cover the whole amount of the loan from your mother/trust and the mortgage.

Presumably your mother's will would cover any charitable bequests to be made from her estate.

Homebuyer78

xylophone said:

Whether the loan is made to you direct  from your mother or through a discretionary Trust, (hardly worth the bother and expense of creating?) it is still a loan and the lender (mother/Trust) would have the right to take a charge on the property as security.
A mortgage lender might not like the idea of a loan and if  the arrangement were accepted, would  almost certainly insist that it ranked as a second charge after the mortgage.
You could consult a mortgage broker concerning finding a mortgagee who would look at the arrangement.
The loan would be repayable on your death - presumably you would  take out life insurance to cover the whole amount of the loan from your mother/trust and the mortgage.

Presumably your mother's will would cover any charitable bequests to be made from her estate.

Thanks for taking the time to reply. If my mother has the right to take a charge on the property, does it mean she has to? She has no interest in becoming a property owner again (even partly), and is simply wishing to put her money into a trust for protection reasons that I won't go into involving my partner - they don't see eye to eye as above. For her, the extra cost and hassle of creating a trust is what she is prepared to go through it would appear so as to ring fence that money. If the two people on the mortgage deed were myself and my partner, and the money from the trust was loaned to me as opposed to being loaned against the property, is this a way that they bank would be happy their interests are protected? Or, would they still consider that my mother could make a claim against the property down the line? 

xylophone

 As far as I can see, it is not about whether your mother wishes to be a property owner but all about protecting the money which she makes available to you and not your partner?
By placing a charge on the property, she can be satisfied  that she has a claim on the property in the amount of the loan. If one of the terms of the loan is that it is repayable on your death, and there is no money in your estate to pay it, then her charge means that she can call on the sale proceeds of the house in satisfaction of the debt. If this were a second charge however, her rights  would  be subordinate  to the rights of the mortgagee.
You intend to take out life insurance to cover the debt - your partner would use this money to repay your mother and she would release the charge.
 She could then either make an immediate gift to her chosen charity or keep the money and leave it to the charity in her will.
If she predeceases you, this money becomes a debt owed to her estate. Her will could assign the benefit of the loan to the charity of her choice - at this point, I assume that  her charge would be released in favour of a new charge by the charity which would have the right to call in the loan on your death.
It would be the duty of your executor to advise the charity of your demise.
Your mother could simply make you a loan and not protect it. The loan agreement would specify that it should be repaid on your death but her only protection would be the goodwill of your partner to repay the debt.
If a Trust were set up with you and the charity as potential beneficiaries, the Trustees could opt to lend the money to you  until death but it seems to me that in their fiduciary duty they would need to take a charge against the property.
Another way of protecting the loan (rather than taking a charge) could be to assign the insurance policy for £50,000 to your mother /the Trustees?

You would still have to declare the loan to the mortgage company - they might lend you less money than they would if you did not have the loan.
And remember that while you would not be paying interest on the loan, you would be paying the insurance premium.
Are you sure that you want all this hassle? Might it be easier for you and your partner to rely on your own resources?
Other posters may have better ideas.