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Leave the house to the kids…

Leave the house to the kids…

When coaching clients, you’ll often hear them say, “I want the house to go to the kids…” But as well as there being some obvious flaws here, it’s actually more about emotions.  Let me explain.

Are all your kids moving back in together?

Whether it’s from a financial planning or estate planning point of view, there seems to be a desire amongst some clients that ‘the home goes to the kids’.  It tends to be the case with clients of a certain generation – they are maybe in their 50s, 60s, maybe even their 70s.  The thing is, their children aren’t small anymore.  And when you try to work through the practicalities, there are some really obvious flaws to this plan.

Let’s imagine the scenario.

You:                 “That’s fine.  Three children you have, isn’t it.  How old are they now?”

Client:              “Well, our Dave is 38 now, our Michelle is 32 and little Tony is 28 ….”

You:                 “And don’t they all have their own families now?” 

Client:             “Yes, that’s right.  Dave is in Australia and has family out there, Michelle has 3 kids…etc”

You:                 “Okay, so how do you see this working, with your 3-bedroom semi-detached?  Are all 3 families planning to leave their homes and move everyone back into the family house? How will it work”

Client:             “Well no, obviously not…”

So it’s the equity you want to leave to the kids?

And so you probe them a little further.  After all, if your client leaves the house to their children, what do they actually expect them to do with the house?  And you can tell that they’ve never practically thought this through before.  Because if they were being logical about it, they would realise that their children aren’t going to move back into that house in a million years!  What they will probably do is sell it.

So we can get agreement that what we’re really doing is leaving the ‘equity’ from the house to the children, and they’ll grudgingly accept that.

Understanding the powerful emotion behind this

But, that’s not actually what they meant emotionally.  And to not understand where this emotion comes from does both the client and you a disservice.

Think about the power of that emotion, ‘to leave the house to the kids’ – even though it makes no sense whatsoever.  The fact that, in practical terms, just by pulling one thread the whole idea falls apart. How strong must that emotional aspect be?  Where does it come from?

To that generation, home ownership was a huge deal

For that generation of clients, house ownership was a dream!  It was something associated with the landed gentry.  Only a select few from the upper classes owned their own homes in the 1940s and 1950s – for the majority of working people, house ownership wasn’t even on the cards.  Instead, you paid your rent to the rent man.  At best, you had local authority housing – a council house.

And people remember the rent man knocking on the door on a Friday – the fear and the panic if you maybe didn’t quite have the full rent.  Just imagine how that would feel, especially if you had a young family.

The fact is, to be in the financial situation where you could finally buy your own house was unthinkable for that generation of client.

I myself am only the 3rd generation from my entire family to own my own home.  My grandad bought the first house ever (in the Parker ancestry) in the 1980s.  It was only during Thatcher’s government that a large section of social housing was made available for people to buy.  They could actually invest a stake in their communities – they could be property owners.

The renting/mortgage divide

But there was a divide between those that did decide to buy, and those that didn’t.  The mortgage payments were higher than what people paid in rent.  So some people felt they’d rather pay less and continue renting – after all, because it was social housing, they still had a house for life. So, why pay more?

But others just wanted to get a mortgage – they were happy to work a few more hours to earn enough to pay that extra.  They wanted to own their home, “I don’t want myself and my children to be constantly fretting about the rent man…”

And over the years, those who bought their own homes eventually paid off their mortgages – they finally owned their property outright.  But then comes the issue with care fees.

The issue with care fees

You know how it works.  If you have equity in your house, then the local authority (in the absence of any other equity) wants to access that equity to pay for your care fees. And when you go into care (this is how this generation often thinks) they’ll be sitting next to Bob who, back in the 1980s, said, “I’m not going to work the extra hours to get the extra money to buy my house, I’m just going to carry on renting.”

But your client is thinking, “hang on, Bob’s getting the same care that I’m getting!  So all that extra work that I did, that I really did for my children, has now been taken away from me.”

For that generation, there’s a sense of ‘broken social contact.’  They had a social contract with society that they would work a bit more and pay a bit more so that they could own their own home, rather than renting.

It’s a powerful, emotional issue

So 30 or 40 years later, the same society is now saying, “ah, you own your own property?  That means you can pay for your care.  But we’re going to pay for Bob’s care fees because he can’t afford to pay for his – he doesn’t own property.”  Whatever the political rights or wrongs of it, to your client (of that generation) that’s an incredibly emotional issue.  It’s incredibly powerful.

So what do we need to do, as planners?  We need to help them to understand this and put it into context so that it doesn’t overpower our coaching and planning work and lead them to make silly knee jerk decisions that aren’t going to be in their best interests.

Be the cleverer person

So, they want to leave their house to the kids?  It makes no logical or practical sense whatsoever.  You can work that out in 20 seconds flat because you are a clever person.  But the cleverer person understands the emotional aspects of why their client feels that way, and that is far more important.

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