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MY FATHER WAS A CAR salesman who, for many years, worked totally on commission, with no paid vacation. In 1953, when I was 10 years old, we went to Cape Cod for a week. A friend gave him a tip on a great place to stay. In his enthusiasm, my father booked for a week and paid in advance.
The place turned out to be worse than a Second World War army barracks. My mother refused to stay. To get his money back, we all agreed that I would have a sudden asthma attack, necessitating our immediate departure. That worked, my parents got their money back and we then stayed in several places on the Cape, ending up in Chatham. Even at age 10, I was hooked.
Fast forward to 1976. I’m married with four children, ages one to six. In a moment of enthusiasm, I said, “Let’s go to Cape Cod.” Amazingly, most of the places I remembered from 1953 were still there. From that summer on, we spent vacations on the Cape in a motel or a rented house. On every trip, I expressed my goal to buy a vacation home in Chatham, as unrealistic as that was. I even subscribed to a local newspaper. Every week, I longingly checked the homes for sale. After several years, my family didn’t want to hear about my daydreaming anymore, but I kept looking.
In February 1987, I found a house that was old, but appeared financially feasible for us. I was warned that if I didn’t buy a place this time, the family was never going house-hunting again. By mistake, we went to the wrong real estate office and they showed us a new house that was in our price range.
After some wrangling, we got a 30-year mortgage at 9¾% to buy the place. I was delighted, as was my family, partly because they wouldn’t have to listen to me each time the Cape Cod Times arrived.
When I say wrangling, I mean it. At the last minute, the bank decided it wanted us to make a larger down payment. I didn’t have more to give and was resigned to losing my dream house. Not my wife. She phoned the bank, and threatened to call every real estate office on Cape Cod and tell them how the bank did business. She was determined to avoid more of my vocal daydreaming. The upshot: There was no additional down payment. My lasting regret was that my father died the next year and never saw the house.
An observer looking at this financial move would be aghast. It was the year before the oldest of our four children headed to college—and the start of a 10-year spell when one, two or three of them would be in college.
To afford the house, we rented it most of the summer. The rent and the tax breaks made it all possible in those early years. By 1997, we could afford to stop renting. All the rental income was necessary, but the way several renters treated my dream was disturbing. We had a rule of no pets, because of family allergies, and yet one renter was observed taking his dog out of the car trunk at the house after hiding it from the rental agent.
As interest rates dropped, we sought to refinance the mortgage. But since we bought at the peak of the market, we had no equity. We were refused several times. Once again, my wife stepped in and called the bank, reminding them of the past wrangling at the time of purchase and saying that, if it didn’t let us refinance, sooner or later we’d go elsewhere. Her contact said to give him a week and he would see what he could do. A week later, we received a letter saying our mortgage rate had been dropped to 7½%, no paperwork, no fuss. I think they had a special file on her.
Fourteen years ago, we made additions, nearly doubling the size of the house, so it now sleeps 12 comfortably. We’re in process of installing a new kitchen, new windows and a new deck, as well as painting the place.
Why, after all these years, and with my wife now age 81 and me 77, would we do all this? My wife says she wants to be sure it’s ready for the kids and grandchildren, so they don’t have to do any work after our death. But do they want the house? Do all of them want it?
A couple of years ago, our estate planning lawyer asked a similar question. The last thing I want is fighting among our children over the house. The lawyer asked whether, in addition to wanting the house, could our children afford to keep it. She also asked what it cost each year to maintain the house, cover the property taxes and so on. I threw out a number, which she doubted was accurate. Turns out my estimate was half of the true cost. Who knew?
We’ve attempted to solve the problem with a special provision in our living trust, which now owns the house, with our kids named as beneficiaries. The value of the house will be determined after my wife and I die. Currently, it’s about $500,000. If one or more of our kids don’t want to keep the place, they’ll receive one quarter of the value. The remaining children will have their cash share of the estate reduced proportionally.
Because I anticipate all four won’t be able to afford the annual expenses associated with the house, we also set aside $100,000—which will be adjusted annually for inflation between now and our death—to be used for property taxes and ongoing expenses. That $100,000 should last at least 10 years. All four kids will also receive additional money from the estate, but I’m pretty sure they’ll need that for their own retirement.
Now, if only I could make sure that—after my wife and I die—there’s no squabbling over who gets to use the house when. What can I say? Good luck with that.
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, he was a compensation and benefits executive. Follow Dick on Twitter @QuinnsComments and check out his earlier articles.
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My in-laws had an interesting way to prevent their heirs from squabbling. Each child had an equal amount f virtual dollars, that they could use to bid on their parents stuff. You could bid it all on one item you really wanted, or across a bunch of items. High bidder got the item.
Interesting story, and a thoughtful approach to your estate planning!
I have a friend who has a 2nd house by the beach. What is ironic is that as much as that house might be giving him pleasure, he really hates his job which he needs to keep that house.
The way i see it, that house which at most he spends his weekends at, gives him less pleasure in proportion to how much he hates his job which he spends 5 days a week at.
I am pretty sure if he sold off that house, he could retire some years early.
Another friend who lives quite simply has retired early and seems to bear no burden in his life these days.
Did you talk to your kids about this plan? What if two want the house? How would that be resolved? Still potential for conflict. Seems better to put it up for sale and have the option for one of the kids to match the best offer (but even that could lead to a conflict if two or more of them want the residence). I speak from experience, once money comes into play, folks behave differently (if they are married, the spouses also come into play). Have many open, frank discussions with the kids….
Nice article. I’m surprised that a house on Cape Cod that sleeps 12 is only worth $500,000.
It’s not on the water or else it would be a lot more.
My wife and I also struggled to finance a house in a nice area. We also won. We didn’t suffer the issues involving children, since we have none of those. We, or I should say, my wife, mainly, located a place on the East coast of Oahu, which we managed to buy with a $250K down payment and a $90K 10 year mortgage. A bank was not involved. That was in 1994, so we finished paying for it in 2004. The house is small, it was built in 1945, then in 1994 was termite ridden, but we coped with the problems.
It’s awfully nice not having to pay rent or mortgage payments.