Most of us, especially after last year’s isolation from the pandemic, have been looking forward to meeting our loved ones this holiday season.
December is also once a year when family traditions are celebrated. On Christmas Eve, the Italians in my family ate homemade rectangular pizza and watched Mass at the Vatican on TV. Now I am making tamale with my mother-in-law and watching the children open gifts.
Although my Scottish-Irish grandmother made delicious mountains of buckwheat pancakes every Christmas morning, I remember she was more of a rule rather than a tradition. I can imagine her standing and exclaiming amid the chaos of plates moving in all directions (not in a perfect circle) to “pass food only to your right!” She also expected that opening gifts would mean order and restraint.
Another rule of my grandmother was that there was no talk of politics or religion at the festive table. This year, I would add that we also should not be discussing COVID-19 or money. While I can’t help you, if your guests are discussing vaccinations, prescriptions, and masks, it might be possible to avoid controversial financial discussions that could ruin the celebration.
With business losses, evictions, the great retirement, and inflation, talk of money is likely to prevail this year. Under normal circumstances, money problems arise simply because we only see each other on holidays. After siblings haven’t celebrated together in 2020, they may feel even more inclined to discuss issues that they think are important to them.
Examples of discussions might include who owes what to whom (sometimes decades ago), who received the most financial support (also probably decades ago), who most deserves to stay in the family home, or who will give up the most if they have to take care of mom and dad.
The best advice for conducting these discussions is to rely on your lawyer, accountant, and financial advisor to avoid conflict. It amazes me how rarely clients use their relationship with their professionals to reduce the demands of their families.
For example, one way you can use is to postpone financial conversations. If, for example, a family member wants to discuss borrowing money while watching a game, you might reply, “This is something we can consider. How about you write down how you think it should be structured and I can discuss this with my accountant in January. ” Hopefully this will temporarily disable them so you can safely return to watching the game.
If you have a good relationship with one of your professionals, you can blame him for not being involved in one of their ideas. Earlier this month, a client called me on my cell phone while visiting family members out of state, and I could tell he was talking to me.
The client’s brother-in-law pressured him into investing in a speculative real estate deal that was not working. From my client’s tone of voice and his past relationship with his son-in-law, I knew my client was not interested, but was looking for a way out. He also did not want to hurt the feelings of his beloved sister and mother.
Without being dishonest or disclosing confidential information, I discussed with the client all investment-related issues (except my brother-in-law) and why this is not the right time to invest. I heard several consonants “ah yes” and “aaa” from the audience in the background.
The client then asked positively if I could recommend that he give his sister some money to help them financially. Fortunately, I realized that this was what he wanted to do and said that I did not see any harm in giving a gift. As a result, the client could avoid a lousy investment while maintaining their relationship in exchange for what they perceived to be a small amount of money. Most of the professionals I know would do the same to help a good client.
Suppose you have more complex problems and think that you may need professional help to minimize family conflicts and facilitate communication. If so, here’s how you can eliminate some of the emotions from the equation and manage your family finances more like a business …
Family Office is a tool that was once only available to families with a fortune of tens of millions of dollars or more. It is often confused with “home office”, but that is a different matter entirely. With a family office, wealthy families set up a separate business office with professionals and staff to manage their wealth and communicate with family members. While it is impossible for most of us to hire full-time professionals and employees, you can use some aspects of the family office right now.
How to create your own “mini” family office will be discussed in the next article, but here is the essence of how it can help you. The professional you choose to host your office, be it your lawyer, CPA or CFP, should be someone with whom you and your family have a good relationship, who communicates well and who you trust. A professional may agree to help you with the following:
–Keep copies of important documents on your secure client portal and make them available to other family members when you specify. (For example, you might want a family member to have access if you become incapacitated.)
– Arranging / mediating family gatherings (in person or remotely) and communicating with family members as you instruct. Sometimes consultants, trainers and financial educators can be invited to help.
–Coordinate services such as tax preparation, estate planning, property management, elderly care services, investment and asset protection / risk management with other professionals.
–Work with your favorite charities to coordinate your charitable giving plans.
The most significant benefits of a family office are that it allows families to grow and maintain wealth for generations and make financial decisions in an informed, pragmatic, and rational (rather than emotional) way.
Consider relying on your professionals to help navigate your family’s financial dynamics in the future. In the meantime, hum a melody to yourself such as “kids laugh, people pass, smile after smile,” and tell any guest who wants to talk about finance, Covid, politics or religion to have another eggnog and have fun. Discussions, experiences and great ideas can wait until the new year.
Michelle S. Herting, CPA, ABV, AEP, specializes in tax planning, trust administration and business valuation. She has three offices in Southern California.