Hypothetical inheritance question regarding buying in-laws house

user1977

pjs493 said:

bobster2 said:

pjs493 said:

bobster2 said:

Your idea depends on not just your BiL being willing to sell his half of the equity in the house to you - but also that he will decide that the best way to hold assets in trust for the grandchildren would be in the form of equity in this house (rather than as other forms of investment). With you living in a home that is owned 50% by you, and 50% by your children.
Under these circumstances what would happen when your children reach 18? And perhaps want their own place? Or access to their share for some other reason?
As a trustee he might quite reasonably not approve of such an arrangement.

Thank you for this insight. I think in that scenario I’d buy my children out of their share if they decided they no longer want it. By the time they turn 18 they’ll both also have access to their JISAs which will have a substantial amount of money in them, enough for a house deposit. 

There’s also the point to make, I suppose, that they’d end up with my share of the house purchased from my BIL when I die. So ultimately in the hypothetical scenario they’d both end up sharing the house if they didn’t decide they wanted to sell off their share inherited from their grandparents. 

You need to reconcile yourself to the fact that when your children are adults they may not want what you want.

You seem to have in the back of your mind the idea that they might want to hold equity in this house (which they may never have any sentimental attachment to) for decades until you eventually die. All the while they would be accruing capital gains tax liability (as it wouldn't be their primary residence) and having to pay additional stamp duty on the places they buy for themselves (because they are already a property owner).

When they turn 18 - they might want to use the JISA as a deposit and force a sale to get their equity immediately so they can have a smaller mortgage on their own place, pay less stamp duty, have less CGT liability, or just buy a nice car.

It’s probably an assumption that they wouldn’t have any sentimental attachment to a house that’s been in their family for generations. 

Even if it has some sort of sentimental meaning to them, that doesn't mean they'd ever want to live in it or own it (or share it with siblings!). None of my previous family homes are located handily for my current work, for example.

And even though you say now that you would be happy to buy them out when the time comes - what if for whatever reason you don't or can't? They're then stuck for goodness knows how long until it can be turned into liquid funds.

I would stick to a more straightforward form of investment for the trust funds.

Spendless

Wouldn't this also mean the kids wouldn't be eligible for any FTB benefits that might be available at the time?

I think when  your loss has been recent and unexpected it must be very difficult to also think that the future isn't going to be quite as anticipated. 

Toddlers (if that's what you have) will quite happily tell you that they never want to leave you and will live with you forever, teenagers tend to be somewhat different. You could potentially be putting an awkward situation between yourself and your 18+ child who doesn't wish to own part of the ancestral home and would rather have the money to do something else.

km1500

a trustee has the legal responsibility of ensuring the funds for your children are managed in the best way eg maximising growth

it is by no.means clear this would be best done by leaving them tied up.in the family home

Debbie9009

Firstly sorry for your loss. 

Just another thought, if this plan did happen, wouldn’t the trustees have to charge you rent for the half owned by your children to justify this being in their best interests, is this something you would be able to pay, if that happened. 

I suspect it would be hard for the trustees to justify this plan as being in your children's best interest, and I wonder if losing your husband so recently is making it hard for you to see this, I can see why you may feel being able to carry out the plan the two of you had is something you would still want to do.  Maybe you should put this idea to one side for now and see how you feel about it in a year or two, hopefully it’s not a decision you need to make in the near future.

bobster2

km1500 said:

a trustee has the legal responsibility of ensuring the funds for your children are managed in the best way eg maximising growth

it is by no.means clear this would be best done by leaving them tied up.in the family home

I think it's important to bear this in mind. E.g. if your BIL is a trustee and decides not to go along with holding equity in the house for the grandchildren - this won't necessarily mean he's being uncooperative or difficult. He may just  feel that he's fulfilling his duties as a trustee.

BooJewels

I'm sorry for your loss - my condolences. 

I'm also sorry for being blunt, but I'm not sure that you can assume that your in-laws won't totally re-write their wills - especially if any pressure is brought to bear by their remaining son.  I think giving it too much thought - even hypothetically - is perhaps not a good idea at this stage.

When my husband died, my mother-in-law had removed me as her Attorney and re-written her will, within a month.  There was no falling out and no acrimony - it was simply her belief that I was no longer family, so earlier arrangements were no longer appropriate.  Changes in family dynamics of this nature sometimes take things in unforeseen directions.

MeteredOut

There's been a lot of discussions re. "the trust" and "the trustees" in recent posts. Just to point out from the OP post (my bolding):

"I assume their share would be held in trust until they become of age."

There's a good chance it is, but, if not, then things change somewhat...

pjs493

MeteredOut said:

There's been a lot of discussions re. "the trust" and "the trustees" in recent posts. Just to point out from the OP post (my bolding):

"I assume their share would be held in trust until they become of age."

There's a good chance it is, but, if not, then things change somewhat...

How else would it be held? I can't imagine a solicitor would have suggested that minors inherit without a trust being set up until they reach a certain age. The estate is fairly substantial.

pjs493

So I've read a lot of comments here with many people suggesting that keeping the property wouldn't be in the best interest of trustees doing their required task. I'm surprised by this given how good property investment is. Liquidating the house and putting the money into stocks and share or a high interest savings account wouldn't give the same return as the house has increased in value over the years. Renting it out to strangers would also give a higher return than cash investments.

I found the comment about having to rent off my own children a little odd too, because surely if the trustees need to ensure that the financial interests of the children are taken care of until they reach their majorities, providing them with a roof over their head is pretty high on the agenda list. But in any case, I'd be willing to do this if required. My current Will even states that trustees can use their discretion to keep or invest in property in order to provide for the children, as well as draw from the trust for things like school fees, a car when they turn 17, etc.

If my BIL does decide the put the house on the market and refuses to let me buy out his share, there is nothing stopping me from just buying the house outright on the open market and then leaving it to my children in equal shares. It all depends on him I suppose.

BooJewels

I think what it actually depends on, is the in-laws wills.  They may well re-write them now they've lost their son, or if one of them passes, the survivor might decide they want a different outcome and re-write their own.  It might be that they leave liquid assets to the grandchildren and the property to their son.  They might exclude you or your children completely in future.  They might re-write them now, precisely to mitigate this sort of conundrum, to something more sensible and pragmatic to provide for their grandchildren.  It's their decision entirely.

Having got that t-shirt myself (I've executed 4 wills recently, three of which had been re-written recently due to previous bereavements), I really don't think that speculating about your future finances, based on the wills of other people who are still alive, is going to be emotionally good for you.  You simply cannot plan ahead based on past expectations from when the circumstances were different.