In business, there is a very important principle when it comes to management and governance of financial matters – the principle of conflict of interest. A conflict of interest arises when the concerns or aims of two different parties are incompatible, or when a person is in a position to derive personal benefit from actions or decisions made in an official capacity.
It is no different in families, particularly when family members are trustees of a family trust. Financial resources are often treated as being shared family resources, although it’s a rather one-sided arrangement. Parental resources are seen to be available to the family but the reverse is not true. This can result in the ultimate conflict of interest; that of who gets to spend the family fortune.
This can play out in a number of different ways, for example children asking their parents for loans or handouts, and family arguments over the equality of distribution of money during the parents’ lifetime or on death. Parents can feel pressured to make personal sacrifices for the benefit of their children. Perhaps the most worrying trend is for adult children to want to take charge of their parents’ money, in particular on the death of one parent. Widows are particularly vulnerable to being controlled by children as they have often had little interest in financial affairs, having left this job to their husbands. Children become involved under the guise of helpful assistance but in the worst cases, can be controlling to the point of bullying or abuse.
The role of a parent is a life-long one but parents must ensure their own financial well being is not jeopardised for the sake of children. Children can be consulted on financial decisions, however they have a conflict of interest which should be taken into account.