QUESTION: Matt in Colorado is 58 and self-employed. His son works with him. In a couple of years, Matt plans to retire and would like his son to take over the business. The business has a $45,000 yearly net profit and his Matt’s son makes up to $55,000 a year. For the transfer, Matt’s son would buy the tools and equipment that he wanted and sell whatever he didn’t want. What’s the best way to transfer it?

ANSWER: If he wanted to give you $50,000 for the tools and he owned the business, he could probably do that in about a year because he’d have the extra income in addition to his salary. He would make $80,000 to $100,000 a year if he owned it by himself, between his income and the profit. If he gave you $50,000 out of the first year and had a slim year, that wouldn’t be a bad deal for him.

Clearly define his role in using your shop. If you say that he can use it until he needs to move, you might look up 10 years later and he’s still there. As far as you’re concerned, he’s five years overdue on having to move, but has far as he’s concerned, he’s just using the shop. You need to say that, in three years, he needs to plan to move. If it doesn’t work perfectly, you can talk about it, but that needs to be the time frame.

Start thinking that way, and that means he has a year to buy you out and two years to find a place to rent. If there’s a major problem in the economy or something, you can put it off for a year if you need to, but go with the three-year schedule and write that down.

You guys are both married, so it’s very important for the four of you to all be in agreement on this. When family works together, there has to be very clear communication. That way, his wife doesn’t feel like her father-in-law ripped them off or something. If she’s in on the decision and your wife is in on it, and you are all in agreement and they’ve gone over the agreement with you and everyone is all right with it, then put your stamp on it and move forward.

It sounds like a pretty easy thing. The other thing is handing off succession. It needs to be very clear and stated. Go ahead and start talking to your team about that as well. Tell them you’re on a two-year schedule and that your son is going to be learning certain things during that time and you are going to make sure he is a leader who can run this place.

That actually gives your employees a lot of confidence that everything is going to be all right. I am probably about 15 years away, not from retiring, but from not running this place as the CEO. I’ve already begun the succession process of building leaders and working with the new owners, who are my kids.

The leadership team here knows that and knows the details, so they are helping all of us achieve that 15-year goal. But that gives them the sense that we are heading the right way. They don’t feel like they have to leave because the old man is getting old and the place will close down when he dies. Instead there is a plan, and that gives them great peace.

It has been very good for attitude and moral around here that we’ve begun to talk and look generationally about how we’re running the place. You’re being very wise about how you are doing this.

QUESTION: Daniel in Detroit is in the middle of his debt snowball. He’s trying to settle with one of the collectors and owes them $9,000 and wants to offer $3,000 that he has now. The collector is asking for a lot of information he doesn’t feel comfortable providing. He has the money to settle. Dave has a plan that he thinks should work for Daniel.

ANSWER: A lot of times, what they’re doing is just gathering up information so they can sue you. I’m not interested in providing them with all that information. I would just offer them the $3,000 and tell them that your financial coach told you to not provide a bunch of information to them.

You offer them $3,000 and if they want to settle this debt, you can settle it today. If they don’t, they can call you back when they want to talk. But you don’t need to fill out a bunch of stuff that enables them to more thoroughly sue you. If they want to take $3,000, that’s the offer on the table. But you don’t provide them with bank account information and lawyer information and a bunch of contact pieces.

QUESTION: Katrina in Texas asks if there’s a downside to refinancing a home often. Dave says it can be good if you save enough in interest over a year.

ANSWER: Not as long as each time you do, you lower your interest rate enough to where you can recoup your closing costs before you move. Every time you do the transaction, it has to work out. The way you do a refinance—and most people do need to be refinancing right now—is you calculate how much interest you will save in a year as a result of refinancing. The way you do that is multiply the interest difference times your loan balance. If you have a $200,000 mortgage and you have a 5% loan and you go to a 3% loan, which saves you 2% a year, two percent on $200,000 is $4,000. How much are the refinance costs? What are the closing costs in order to refinance? If you look at that and it’s $10,000, you divide that by $4,000. That would tell you it takes you two and a half years to get your money back. If it’s $8,000, it’d take you two years to get your money back if you’re saving $4,000 a year. That’s pretty substantial.

Truthfully, your closing costs would be lower than either one of those, so in that example, if your closing costs were $5,000, you’d get your money back in a little over a year. Even if you refinanced two months ago at 5%, if you were to drop it to 3%, you’re going to get your money back really quickly. That’s called a break-even analysis. How long does it take you to get the money you spend on closing costs back with the interest that you save? That gives you the answer of whether you should refinance again. There’s not really a “you’ve done this too often” rule. If you refinance three times in one year, it would have to be that the interest rate environment is that rates have dropped pretty substantially through that year. You really can’t do this and save an eighth of a percent. It doesn’t work out for you.

QUESTION: Carolyn in Los Angeles says her daughter married a man she didn’t approve of. They’re living in a rental with two kids and a third on the way. She’s been helping her daughter with rent for several years, and she’s tired of sending them money. Can she skip leaving her daughter an inheritance and leave it to her granddaughter?

ANSWER: You can leave your home to anybody you want with no tax ramifications whatsoever. It doesn’t have to be a relative. You can change the terms of your trust while you’re still alive—who the beneficiary is.

I think it’s a bigger problem than the money. I think this goes all the way back to you don’t approve of him. That’s what’s bothering you. It starts there, and it weaves its way through a whole series of bad behavior on their part. Now you’re financing the insanity.

I was kind of shocked. My mouth dropped open when you said you agreed to pay the rent. I thought you were going to say you didn’t. You agreed to pay a lot of it for two years. You really stepped into it.

If she holds your grandkids hostage for money, then she just does. That’s not on you. That’s on her. I’m not going to be willing to pay someone money to get to visit my grandkids. That’s toxic. It’s sick. It’s twisted.

I think the problem you’re going to have is the problem I would have if I were in this conversation. You’re so disgusted with both of them that it’s going to be very difficult for you to not let that come through in your tone and your body language. It’s going to be hard for you. That’s what will put them off more than the money—this sense that you’re disgusted with them.

What I would do if I were in your shoes is two things. One is I would pick up the book Boundaries by Dr. Henry Cloud. You need to get your highlighter and your sticky notes out and mark that book all over because you’re struggling with setting boundaries with her. The second thing I think you do is spend some time just praying about this and discussing this with your husband and getting your spirit in the right place where you’re kind but very firm. I have to work to get there in these situations. That’s not my nature. I just want to choke them. Then they know it, and then it all unravels, and it just doesn’t go well. I’ve got to get myself to where I really care about them, and the truth is if I really care about them, you have to figure out you’re not really helping them by giving them money because it enables them to not have to deal with their own misbehavior.

Really, the best thing you could do is force them to deal with these areas of their life that they’re not doing well in. Then I would go to them and say something like, “I really need to apologize to you because I should never have helped you with that rent. I love you all too much to drive a wedge between us with money, and I’m afraid I might have done that. I’m just really sorry I entered into that. I really wish I had not done that because I’m afraid that it’s hurt our relationship, and our relationship is so much more valuable than money. Here’s what I’m going to do. I’m going to fix that situation. I’m going to stop giving you money. I’m not going to do it this month, and I’m going to give you money for the next three months. At the end of that time, I’m not going to give you any more money. But I’m not going to give you that money for the next three months if you won’t go through Financial Peace University. I’ll sign you up for that, and I’ll pay for you to go through it, but I want you to go through this so you guys can learn how to handle money.” You can look at your son-in-law and just say, “As the man of the house, I’ve stolen some of your dignity as your mother-in-law by paying for your house. That’s just not fair to you, and I don’t want to do that to you anymore.”

The difference in that and, “You’re a freaking bunch of bums, and you shouldn’t have married this twerp in the first place. I shouldn’t have given you any money, and I’ve regretted every day I gave you money. I’m not giving you any money anymore because I’m disgusted with you people.” That’s really what we want to say, but it’s not going to help them, it’s not going to help you, and it’s not going to help those kids. That’s about you and me being bigger than our little kid feelings when we’re ticked off and going, “How are we really going to deal with this in a way that’s helpful and brings healing to this situation and these people?” They just need to hear real calmly from you that you love them and that you’re going to support them with prayer and education. When they get ready to do something really cool, you might even match them as they start putting their act together. But we’re not going to get in a thing where I take your dignity away from you ever again by giving you money.

Your son-in-law is feeling pretty inadequate across the board, and he’s lashing out. You’re going to have to figure out some things you like about this guy at some point because he’s married to your daughter. There’s a lot to not like about him. I already don’t like him just listening to you, but you’re going to have to find some things you like about him in the process.