8 Ways to Manage Sibling Wealth Disparity this Holiday Season - Doug Baumoel
The holiday season brings with it many conflicts that are exacerbated by an onslaught of family gatherings. Gift-giving is a big part of this. It conveys the disparity of wealth between siblings that can create ill will between family members during this time. I recently wrote an article with Blaire Trippe for Continuity Family Business Consulting titled ‘8 Ways to Manage Sibling Wealth Disparity this Holiday Season.’
“In order to maintain harmonious sibling relationships, it’s critical to understand how to manage sibling wealth disparity. To start, it’s important to ensure the siblings have a shared understanding of the wealth disparity, a common set of values around the wealth, strong family bonds, and a strategy for addressing the challenges wealth disparity can pose.”
In the article, I put together an eight-step plan for the holiday season, to manage sibling wealth disparity.
1. Develop a shared vision of family
“What does it mean to be a family? If siblings have a common vision of family, they have a strong foundation to manage the challenges that come with wealth disparity.” This question builds on other questions that are integral to building a shared understanding between family members.
2. Understand the reasons behind the disparity
“This can be difficult to discuss as siblings may have differing views of where the wealth disparity comes from. Regardless of the reason, these discussions touch on important issues like respect, entitlement, values, differing perceptions, and more.”
3. Create an understanding of how wealth is used
“How should the family’s wealth be used, preserved, borrowed, and shared? Agreeing on these questions helps achieve the shared family vision and establishes guardrails to keep decision-making on track.”
4. Institutionalize decision-making that reflects shared values
“If education is an important value to your family, wealthier siblings may create a shared education fund to benefit the children of the less wealthy siblings, or a family venture fund may be created if entrepreneurialism is a value. There are many models families have used to manage shared wealth, such as family offices or family foundations.”
5. Clarify intentions around estate planning
“Parents can help reduce conflict by being clear about their intentions when it comes to their estate plans. Parents should be able to tell their children why they’ve made certain decisions and encourage them to share their thoughts.”
6. Establish guidelines
“Creating rules around certain situations can help to avoid conflict in the future. This may mean establishing guidelines around who gets to use the family vacation home, but this is also incredibly important around the holidays when it comes to gift-giving.”
7. Form standards for wealth preservation
“Having standards around your wealth ensures its preservation for generations to come. This can include estate planning and investment management, but can also include prenuptial agreement requirements and social behavior expectations (i.e. sobriety, risk-taking).”
8. Professionalize the business
“Having a proper, independent board and well-articulated policies to govern the business is especially important when there’s a disparity in ownership among siblings. Good family governance ensures all stakeholders’ interests are represented.”
Keeping these pointers in mind can make navigating the holidays easier. In the absence of hostility triggered by gift-giving, there is room for important familial affairs to remain at the fore.
Read the article here.
