Dear Moneyist,
I have a question regarding my fiancé and his father. My fiancé’s father owns his own business that my fiancé has worked at on and off for the better part of a decade. The hours are always sporadic, as is the pay.
My fiancé’s father tends to withhold money from my fiancé’s paycheck to contribute to an IRA in my fiancé’s name with his father listed as the custodian. My fiancé is in his 30s. His father is dragging his feet in removing his custodianship and has been for years, leaving my fiancé unable to touch or move the money.
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Do we have any recourse against my future father-in-law if he refuses to remove his custodianship? My fiancé contacted the holder of the account and was told his father needs to send a letter of intent that he no longer wishes to be the custodian as well as a new application.
I’m concerned my future father-in-law will continue to hold this account over my fiancé’s head. It would give us much more peace of mind if we were able to sever that tie to him.
Frustrated fiancée
Dear Frustrated,
Withdrawing money from an IRA is usually a really bad idea and results in large penalties. And your boyfriend may be able to remove his father, if this arrangement was made when he was a minor.
That said, you’re coming at this problem through the wrong door. Forget about Door A for now. That’s the door that leads to a room where your fiancé and his father go back and forth about his IRA. It’s also where your future father-in-law and his son hash out why he believes your fiancé needs a custodian. Has he been irresponsible in the past? Or is his father simply overprotective? Is your fiancé comfortable working for the family firm? Or was that a decision born out of necessity?
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Try Door B. That’s leads to a room with two chairs, a table with some paper and pen, a computer and a pot of fresh coffee. That’s where you can sit with your fiancé and talk to him about his goals and becoming financially independent, map out a financial plan for when you both get married (savings, home ownership, spending expectations etc.) and figure out what would make you both happy. The answer, of course, is financial independence.
That’s when you turn on the computer and look at your fiancé’s resumé. What are his skills? What are his aspirations? Does he want to work at his father’s company for his whole life? Does he lack confidence? What can you do as his girlfriend to help him find a new path that leads to financial independence? Does he need to go back to college or work on his presentation skills to find a new job? I have so many questions, but none of them have anything to do with the IRA.
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You are planning a future together and you want to make sure that your fiancé understands what it means to be responsible for a family, should you decide to have one, and have a regular and stable source of income. It’s good news that he’s saving for retirement, but it would also do wonders for his self-confidence if he were to stand on his own two feet, without any help. Your marriage will have more success if he is a man who is not tethered financially and emotionally to his father.
This is a good time to have this conversation. Figure out all of that first — and I bet the IRA custodianship issue will take care of itself.
Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used).
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