Perils of financial deals among family and friends

Perils of financial deals among family and friends
13 August 2013

I was recently visiting a friend in the United Kingdom. Her father-in-law has made, and lost, a significant amount of money over his lifetime. He is now of retirement age, and, it would appear, is concerned about his financial well-being and security.

His only son – my friend’s husband – has his name on the paperwork for his parents’ mortgage, thus enabling them to have their own roof over their heads, and he also pays a proportion of it.

The older gentleman has just requested that his name also be added to the official documents. We can only speculate the reasons why. Could it be, as his daughter-in-law thinks, that he doesn’t trust her enough to allow them to stay put in their own home should her husband die before they do? Or is it his way of protecting his home from any possible break-up of his son’s marriage? All eligible assets in such an event would be split between the spouses.

Or is it simply a man who feels vulnerable trying to regain a bit of control.

Tempers flare

Whatever the reason, it has certainly caused tempers to flare. The daughter-in-law believes the home is an asset that her children should inherit. After all, their father has been paying towards it and is legally liable should there be a problem with meeting payments. Plus it has impacted on their lifestyle. There are many other things they could be doing with the money put towards that mortgage.

She does not believe the asset should be split among the grandparents’ children equally and is concerned that, should the deeds change, then this could be a possibility.

The son (her husband) is caught between a rock and a hard place; he wants to be the dutiful son and provide his parents with peace of mind. He doesn’t want to get into any potential confrontation with them, but equally doesn’t want the grief he’s getting at home regarding the implications of having a change to the deeds.

What do you think he should do?

The thing is, once this type of thing is asked of someone, there it is: out in the open, needing to be addressed.

Money and family

It’s so unfortunate, but so very real, that many a family and friendship has fallen foul of money issues. Or should that be: has fallen foul of addressing who owes and who owns what.

Of course we all want to do right by our parents and extended families. We also want to do right by ourselves and our own family units too. And they don’t need to be mutually exclusive.

A can of worms

But it seems that they often are, or are perceived to be. There appears to be a mixed bag of obligation, duty, being too embarrassed to go over small print and get all paperwork in order, coupled with resistance to having very frank, open discussions of what this means for all the individuals concerned.

Instead of families coming together to deal with money and life issues, it can become a battleground of vested interests, old scores being settled, and the worst coming out in people you once thought you knew better than anyone on Earth – and believed you could depend on to have your back.

I bet my bottom dollar you, or someone you know, has a horror story to share. How about the one where one sibling takes on the full burden of caring of elderly, ill parents, earning less as a result, if not nothing, with the implicit understanding that they will get a larger share of the family home for example – only to find that, when their parents die, or are moved into care, their siblings renege on the understanding.

Or what about lending someone you trust money, who was desperate for it, only to see them spend on themselves first, and you last – if at all. I recall a woman I know who has an unskilled job who had amassed what amounted to a fortune for her – just under $30,000. Her daughter-in-law pleads for help: her home is about to be repossessed, the banks were breathing heavily down her neck as she had multiple credit cards that she’d maxed out and missed various payments for – you know the kind of thing. So what does the mother-in-law do? She hands over her life’s savings.

She felt she had no option; she couldn’t see her grandchildren on the streets much gratitude ensues, with promises of the loan being paid off. A few years down the line and this woman, who is far from her physical peak, is still working at her unskilled job, has no nest-egg, while her daughter-in-law is back to her old ways, and no money has ever been paid towards the supposed short-term loan.

Be open and transparent 

The message here I believe is: don’t shy away from having everything out in the open, discussing options, ramifications and expectations. We’re not all in a position to be able to write off chunks of money handed out to help our nearest and dearest – especially if it means you will end up having to struggle to make ends meet when you are older.

I fully appreciate that many situations seem impossible: what parent would leave their child to languish in jail over debt if they could help? But. Sometimes we have to be cruel to be kind. Else we’re perpetuating the situation, and everyone’s in trouble in the long-run.

If your loved ones won’t sign legal paperwork, then don’t go ahead with the request.

This article first appeared in The National. You may also be interested in:

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