Family, finances and emotions are three things that often seem to go together. While that’s not an inherently bad thing, it can be a recipe for conflict when not handled correctly.
Case in point: Picture siblings Janet, age 51, and Michael, 60, who recently inherited valuable real estate from their father in the form of an ancestral home on 200 acres in rural Alabama. Michael retains fond memories of living there as a small boy, before the family moved to Atlanta. Janet, on the other hand, has only seen the property once and holds no sentimental attachment to it.
As each sibling looks out on their life and eventual retirement, they see very different pictures. While a large part of Michael’s retirement will come from his employer, Janet’s is fully dependent on her investment portfolio. While Michael imagines one day bequeathing the old family home to his children, Janet wonders about the investment and philanthropic possibilities that would open up if the real estate were sold.
How’s that for a potential powder-keg of a situation? How do the siblings even begin to come to a wise, informed decision about the property that takes both of their unique situations and desires into account?
Here is a helpful 3-step process that Janet and Michael, or anyone facing an emotionally-charged financial decision, can follow:
- Acknowledge that emotions are involved. Agree to be considerate of everyone’s feelings, and agree that the goal is to make a wise decision that also keeps the peace.
- List each party’s goals in the matter. For instance, one of Janet’s goals is to provide for her retirement. One of Michael’s is to pass the real estate down to the next generation. If the next generation is old enough to be part of the decision, consider getting their input before you come to the table. If they’re younger and don’t yet have a voice in the matter, still consider future implications.
- Examine the issue from a strictly financial standpoint. To ease fears, make sure everyone knows that this is simply to understand the options available. Bring in an advisor if needed to fully and objectively analyze all relevant data. In the case of Janet and Michael’s real estate, they will want to establish the market value of the property; calculate the expected return on potential uses such as timber or hunting leases; discuss alternative investment strategies if the property is sold, etc. Finally, outline each potential path forward (i.e. selling real estate, growing timber, Michael buying out Janet’s share) and the financial implications for each party.
What decision did Janet and Michael finally make? We’ll just say that the process of acknowledging emotions and then putting them aside enabled Janet and Michael to wisely combine soft hearts, hard heads and objective facts to come to a decision that felt good to each of them. Best, they gained respectful insight into each others’ unique needs and preserved the family closeness so important to them.
Is there a circumstance in your life that could benefit from this measured, respectful and objective process for family discussion? If so, PARTNERSINWEALTH would love to help. As your unbiased sounding board on financial matters, we can facilitate your discussion fairly and objectively, with your whole family’s best interests at heart. For more information, helpful guidance or professional assistance, please contact Jim Waters, CFP®, at PARTNERSINWEALTH , 713.964.4028 or firstname.lastname@example.org.