written by Kenney Hegland

written by Jim Duzak |  

I was talking recently to an old friend, “Janet”, who told me about a troubling situation that I suspect is all-too-common among Boomer parents with adult kids .

Janet is a 61 year old divorced woman with one child, “Heather”. Heather is 33 and has been married to “Matt” for about four years. Two years ago, Heather and Matt decided to open a coffee shop and run it as a team. They had some savings but couldn’t get bank financing, so Heather turned to her mother for help. Janet at that time had a substantial 401(k) account, and felt she could afford to borrow $100,000 from it to make a loan to her daughter.

Things went pretty well until about six months ago, when Heather discovered that Matt had been carrying on an affair with a twenty year old barista they employed. Although Matt insisted it was a one-time thing and promised to reform his ways, Heather—who had suspected that Matt had been unfaithful with other women even prior to the barista—had seen enough. She insisted that Matt leave the house, and has filed for divorce.

Matt is still running the shop, but Heather wants no part of the business any more. She has asked the divorce court for an order requiring Matt to sell the business and compensate her for the money owed to her mother, plus Heather’s share of anything that remains after the loan is paid. Matt acknowledges Heather’s fifty percent interest in the store, but denies that there was ever a loan. He has stated in court filings that his understanding has always been that the $100,000 was a gift. In fact, he says it was a gift to both of them.

So, where does all of this leave Janet? In a bad place, sorry to say. Despite having been a successful business executive for many years, Janet did something with her daughter that she would never have done in her professional life: she failed to put anything in writing.

Prior to sending Heather the $100,000, Janet had several phone conversations with her and sometimes with Matt, too, about the prospective business. She wanted to be sure they had thought through all the potential problems that small retail start-ups can encounter, and that they had budgeted enough to provide for their living expenses as well during the crucial first year. She recalls using the word, “loan”, numerous times in these conversations, and is certain she never called it a “gift”. But when she sent the check to Heather, the cover letter said nothing about a loan, and the notation on the check itself said only “For Coffee Shop.”

How this all plays out is anyone’s guess, but I can tell you for sure that the situation has already caused Janet a lot of sleepless nights as well as some additional financial outlays. She has retained a lawyer to represent her interest in the divorce case, and will have to travel from her home in Michigan to her daughter’s home in Georgia to give a deposition, and possibly testify at trial there if the case can’t be settled. And tha...