Our daughter cannot afford to live in our house after we pass away. What can we do?
My daughter, her partner, child and baby due this spring live with us because they cannot afford to rent or buy anywhere.
They have been with us for over five years. What arrangements can we make if one of us dies because there is not enough money to maintain the house?
In our will, our daughter inherits the house with her two stepbrothers, who are both in their 50s. She is in her early thirties.
Can we prepare a document that will help her as I know she can’t afford to maintain our house but she couldn’t afford to rent right away.
My husband is 80 and I am in my 70s and it is a major concern for us.
Rachel Waller: You can change your will to leave assets in trust for your three children
Tanya Jefferies from This is Money replies: It is often the case that adult children who continue to live in the family home and may care for their elderly parents for years cannot afford to stay there after losing both of them.
It is therefore wise to think in advance about anticipating different scenarios. It is worth going back to the notary who made your will or consulting a new one about how best to fulfill your wishes.
We asked a lawyer with extensive experience in this area to explain what the key issues are and what options are open to you.
Rachel Waller, controversial wills, trusts and estates partner at Excello Law, responds: I assume that you own the house you currently live in, and that it is large enough to comfortably house you, your husband, your daughter, her partner and their (future) two children.
However, I’m not sure what maintenance is required, if there is a mortgage on the house and how much it would cost to maintain the house.
Therefore, in order to answer your question, I have assumed that you live in a large property, perhaps with a mortgage, and that you and your husband plan to leave your estate to each other when the first of you dies.
If you’re considering the scenario where you’ve both passed away and your daughter and her family are living in the big house but can’t afford it, you have a number of options to prepare for this eventuality.
First, if you have sufficient other assets, you can leave your entire estate to your daughter and use those other assets to pay any estate taxes owed and provide your daughter with sufficient income to support the assets.
This would mean that your daughter and her family could stay in the house, but it could also mean that your stepsons would receive nothing.
Another problem is that if your daughter married her partner and they subsequently divorced, your daughter could still end up losing the house.
A better alternative, therefore, might be to amend your will so that your assets, including the property, are given in trust to your three children and/or their children.
You can then leave a letter of wishes explaining to the trustees how you would like the trust assets to be managed.
A letter of wishes is a non-legally binding document that accompanies your will and gives you guidance and insight into what you want to happen to your estate.
This letter may provide specific instructions or preferences on various matters.
For example, if you have other assets, you can ask that your daughter and her family stay in the house and use the other assets to maintain the house.
After a certain time or upon a certain event, such as when your daughter is able to rent another property, the house can be sold and the proceeds of the sale are distributed to all beneficiaries, along with your other assets.
You might even decide that because your daughter has benefited so much, your stepsons and their families should then owe a larger share of the estate.
If you do not have sufficient assets for your daughter to continue living in the house, you can also indicate that you want to sell the house to purchase a smaller, mortgage-free property in which your daughter and her family can live and support. .
Again, this could be for a specified time or until a specified event, at which time the trust assets could be distributed to all or other beneficiaries.
Since the letter of wishes is not legally binding, keep in mind that the legal obligation of the trustees would be to act in the best interests of the beneficiaries and ensure that they are all treated fairly.
The trustees also have to pay taxes and have other financial considerations. Therefore, please seek specific advice to ensure that your trustees can carry out your wishes.
Whatever you decide, changing your will and not dividing the house between the three siblings could cause turmoil between them, or even be challenged by your stepsons.
Therefore, discuss what you think with all three in advance, so that they know what to expect and why.
Do you have a financial planning question? financialplanning@thisismoney.co.uk
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