When Couples Disagree, Find a Unifying Value
This time we hear from Amy Jamrog, wealth management advisor, of Holyoke, Mass.-based The Jamrog Group, a financial advisor of Northwestern Mutual Wealth Management Co. She describes a creative solution that resolved a touchy issue for a couple planning their retirement.
I began working with Emma, a woman in her 60s, around a decade ago. At that time she was legally unable to marry her same-sex partner, Cindy. Cindy had been retired for some time and living on an inheritance. Emma was the owner of a small business who was finally ready to slow down and join Cindy in retirement. They had one major point of contention, however: a piece of real estate that was sentimental for one of them, but nothing but an albatross around the neck of the other.
Cindy owned the rental property, which was worth $400,000 with a $100,000 cost basis. If she sold the property she would be taxed on a $300,000 gain, which was not an appealing prospect for her.
The property also had strong sentimental appeal. For years she had been renting it to occupants at below-market rates. In effect, she was losing income on the property but she didn’t care because she liked providing a break to the renters. It made her feel good. The property did not make Emma feel good. She wanted Cindy to sell it, despite the hit on Cindy’s taxes. The house became a source of stress and they couldn’t talk about it without arguing.
I realized I had to come up with a new idea that would get them to sit down and listen to each other without getting defensive. Rather than focusing the discussion on the property they disagreed about, I decided to look into options that would bring the two of them together around values they both shared — namely, giving back to the community.
I asked a community foundation if they would accept a gift of real estate. While they had never done so before, they were intrigued and said they were open to the possibility. I then embarked on a series of conversations with Cindy, Emma, and two legal experts, one on real estate and the other on foundations. Eventually, we discovered a solution: Cindy could donate the property to the foundation, which could then sell it and establish a donor-advised fund.
Cindy donated the property to a local community foundation, which sold it the next day for $400,000 to a pre-determined buyer, creating a donor-advised fund managed by both Cindy and Emma. This meant that they now had $400,000 in a fund that they could distribute to charitable causes. And to top it off, there were no capital gains taxes to pay.
Cindy and Emma called this the best recycling project they’d ever been involved in. This solution allowed them to donate more to the charities they cared about than they had been able to in the past, and also brought them together to think about giving as a couple.
When a couple is at loggerheads, they may get so focused on their disagreement that they don’t consider alternative solutions. This episode showed me how an advisor can play a key role in solving such disputes by coming up with alternative ideas — particularly ones that are based on something the clients share, rather than what divides them. I also learned the value in being creative when it comes to advising clients.
The solutions aren’t always right in front of us, and sometimes we have to go looking and do some research.