Setting up apple watch 4 with a family member will not work

i have an apple watch 4 with cellular & gps. i can pair with an iphone 8 with ios 12. restarted both watch and iphone.

I setup family sharing on the iphone under settings, apple id. Invited a family member who signed into my invitation & accepted so this member is now listed as an active family member.

I open up the apple watch app on the iphone. Choose to skip the update of watch's OS and continue.

The app recognizes the watch via the viewfinder. choose setup with family member option. the setup tells me to enter in a passcode into the watch. I enter the 4 digit passcode into the watch. On the iphone the screen says "setting up family member" with a spinning icon and remains there until the app times out.

Not sure what's going on.