8 Ways to Manage Sibling Wealth Disparity this Holiday Season

The holidays can be the best time to address ill feelings triggered by gift-giving

Byline: Blair Trippe and Doug Baumoel

Estimated read time: ~4 minutes

The holiday season is upon us and, for many families, this time of year can bring a multitude of issues to the surface. One such issue, sibling wealth disparity, (re)emerges when it comes to gift-giving. Money and items gifted by siblings may not be of equal value due to their wealth disparity, and this can wreak havoc and cause conflict among families.

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.

Below, we share eight steps that can be taken this holiday season (and year round) 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 shared vision should provide insight into the following questions:

• • What does it mean to be a close, multi-branch family?
  • How close to or involved with each other do we want to be?
  • To what extent should we be able to rely on each other emotionally, financially, and socially?
  • What is our shared mission as a multi-branch family?
  • How will we each deal with differences in our lifestyles, values, and behaviors?

When siblings answer these questions together, they have a shared understanding of what family means for their generation and develop a vision for how to be a family in the future.

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. One sibling may have made poor decisions that lead to them losing their wealth, one may have married into wealth, and one may have worked hard and feels as though they deserve their wealth. Regardless of the reason, these discussions touch on important issues like respect, entitlement, values, differing perceptions, and more. At this step, bringing in an experienced outside facilitator may help families reassess their understanding of history and be open to new ways of thinking.

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. This is an important time for purposeful dialogues within and among family branches. Individual branches may want to first discuss among themselves before having siblings weigh in to clarify their own values concerning wealth.

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. Some families also choose to develop a family council to manage and govern benefits in succeeding generations. There are many models families have used to manage shared wealth, such as family offices or family foundations.

5. Clarify intentions around estate planning

As we’ve discussed, searching for what’s “fair” often results in conflict. Why? Because when it comes to the search for fairness, there is no single answer. However, 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. However, there’s a limit to what parents can do—they must instill in their children the responsibility to treat each other fairly.

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. Having a discussion about how each branch of the family can participate in gift-giving in an affordable way that reflects the family’s shared values ensures everyone feels included.

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. When stakeholders have different levels of individual wealth, they may see risks and opportunities to the business very differently. Good family governance ensures all stakeholders’ interests are represented.

How we can help

When it comes to sibling wealth disparity, the actual wealth disparity is not necessarily what causes the conflict; in fact, it’s usually the values, history, and behavior related to the wealth that are of issue. At Continuity, we’re ready to help you and your family navigate the challenges surrounding sibling wealth disparity, especially at this time of the year.

Contact us today to learn how we work with families and their advisors to make potential conflicts related to wealth an opportunity to strengthen the family and its business.