Medical Malpractice

Few situations have a greater potential for problems as when dealing with money and relatives. If you've ever had a child ask you for a loan or a distant relative request money to start a business, then you know just how touchy these situations can be. Here are some real-life situations, along with some simple steps to help you safely navigate the tricky waters that result from mixing family and finances.

John and Sue were approached several years ago by their son, a recent medical school graduate. He wanted to purchase some land on which he and his family would eventually build a home. When it came down to working out the details, he discovered that he needed help. Scrambling to make the deal work, he pressed Mom and Dad.

They agreed by signing for the loan and titling the property in their name. Their son made the monthly payments directly to the bank. But John and Sue didn't realize the risk they were taking.

John and Sue are medical professionals and have protected their assets from lawsuits using malpractice insurance, special trusts and partnerships. From a liability standpoint, they have protected the 'front door threats' but ended up leaving the back door wide open.

John and Sue just discovered that their son is in the final phase of moving a house onto the property. Suddenly John and Sue realized that they were the ones that would be liable if one of the workers was injured or killed.

It was different for Frank and Jane. They thought it would make a good investment to buy a home near their daughter's college. She could live there while she was in school, and they could sell the house after that. The home was in their name and the loan was in both the parents' and child's name. It seemed like such a good idea at time.

Now their daughter has finished school and recently married. Guess where she and her husband are living? And guess who has yet to pay a penny in rent? Worse yet, Mom and Dad are left holding the bag. It is way past time for their chick to sprout wings and fly on her own, but there's little motivation to leave that comfortable nest.

For Sam, a successful surgeon, it's not just the kids that want a piece of his wealth. It seems like a week doesn't go by that he doesn't hear about some hot business idea from a distant relative or casual acquaintance.

There are several steps you can take to avoid these uncomfortable situations. First of all, don't let emotions force you into making bad business decisions. As much as you want to help your child, don't let short-term situations push you into long-term commitments you'll regret later.

Assuming you're comfortable offering financial help, the number one rule is to eliminate any possible confusion or uncertainty by having everything in writing. There are several inexpensive software packages available that have a myriad of legal documents that can be modified for your unique situation.

Second, consider using a go-between, such as a lawyer, CPA, or financial advisor. This person will work for your best interest and keep the emotional aspect to a minimum. And in the event that your child or relative doesn't keep their end of the bargain, the go-between can do the dirty work on your behalf.

This brings us to our third point, which is to enforce any agreements you have. It doesn't do much good to have a contract you don't actually enforce. Otherwise they won't be motivated to fulfill their obligations.

And if you're like Sam and tired of being pestered by relatives for money, a financial go-between could be the perfect solution. After a while, the word will get out that you're no push-over and your go-between can still determine any ideas that actually do have merit.

By keeping details in writing, using a go-between, and enforcing agreements, you'll help your kids learn to be responsible adults and stand up on their own. And hey, maybe someday when they've become successful, you can hit them up for a little payback of your own. "Son, have I got an opportunity for you!"