As the children are minors, a variation can only be made on their behalf under the Variation of Trusts Act 1958, or as a result of a successful application by the mother under the Inheritance (Provision for Family and Dependants) Act 1975. These could be costly in themselves.
If it is seen as best advice for the mother to fund the shortfall in the estate, in order to enable her to raise the finance, perhaps she might be appointed as a trustee so as to give her a legal interest and for her to personally guarantee payment of the mortgage instalments. As this will be for the benefit of the beneficiaries – to enable them to continue living in their home – the trustees might agree to reimburse her out of the proceeds as and when the property might be sold. However, it might be an idea to have a counsel’s opinion supporting that course of action, in case there should be a fall out within the family at some future date.
Whatever route is adopted, the mother should also be aware that whoever pays the mortgage may be treated as a settlor by HMRC.
Paul Saunders FCIB TEP
Independent Trust Consultant
Providing support and advice to fellow professionals