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When it comes to dividing the family farm, or an estate, siblings can avoid arguments by having timely and open communication to try to anticipate problems before they happen.Getty Images/iStockphoto

Four siblings from Southern Ontario have inherited a family farm with a house – and along with it a family-sized problem.

One sibling who has lived in the house rent free for the past year wishes to continue the arrangement indefinitely. Her reasoning is that since she grew up on the farm, she should not be expected to pay rent if she chooses to make it her permanent home as an adult.

The siblings don't have a formal agreement regarding division of the family estate, but the three siblings who live elsewhere trusted the fourth to be reasonable in her demands. Now what do they do?

"You have to stand up to the sibling rocking the boat and say, 'We own the property equally. You can't live here for free unless you buy us out,'" says Jason Heath, managing director of Objective Financial Partners Inc. in Markham, Ont.

Mr. Heath, a certified financial planner (CFP), says one of the siblings involved in the family farm dispute is a client. Since their relationship is strictly professional, he may offer to help resolve the impasse in his capacity as a third-party financial expert.

Despite the scenario outlined above, a recent survey found that just 15 per cent of siblings have conflicts over money with their brothers or sisters.

However, reports Ameriprise Financial, a leading U.S.-based advisory and asset management company, when siblings do fight over finances, their parents are the reason for the conflict 68 per cent of the time. The survey found that the top issues centre around how an inheritance is divided, whether one sibling supports his or her parents more than another, and whether the parents are being fair in their financial support of grown-up children.

Beyond these disagreements, siblings can argue about different money values or spending habits (56 per cent), varying levels of income (46 per cent) and issues involving repayment of money (33 per cent).

"I would tend to agree with the survey's findings," Mr. Heath says. "Most siblings aren't involved directly with each other financially unless it has to do with a family business or an inheritance. These are touchy subjects for all involved."

Resolving financial disputes between siblings once they erupt is usually complicated. The best advice is to adopt strategies that minimize the chances of a conflict happening in the first place. The key, say financial planners, is timely and open communication, and anticipating problems before they happen.

"Document everything in writing when you engage in any financial transactions with siblings," Mr. Heath says. "Arrangements are best adhered to when the terms are outlined in advance."

And be honest. "If you don't speak up and you let financial stresses fester, it's not good for anyone," he adds.

It's not uncommon for one sibling to take the lead when it comes to the family estate or business, but he or she needs to be fully transparent to ensure there are no issues with the less-involved siblings.

"Big decisions should be made together," explains Mr. Heath. "And if siblings are involved in a family business, I would be inclined to treat business conversations as being entirely separate from family conversations."

Marc Sherman, CFP and owner of Toronto's Sherman Financial Planning, says disputes over money and inheritance can sometimes serve as a proxy battleground for larger family problems and conflicts, such as sibling rivalries or competition for the affections of a parent.

Sometimes a sibling will simply not understand why the estate was divided as it was, and can perceive it as unfair. For example if one sibling spent time or money caring for an elderly parent, he or she may feel entitled to be compensated or repaid from the family estate.

"Unfortunately in the case of disputes over inheritance, by the time the conflict erupts it may be too late to do much about it," Mr. Sherman says. "Siblings should try to understand each other's perspectives and not make a financial disagreement a stand-in for old resentments."

To avoid unpleasant surprises, parents should discuss their financial situations and their intended bequests with their children while they are still of sound mind and body, advises Mr. Sherman.

That means explaining clearly why they want to divide their estate as they do, and addressing directly any concerns their children may have. Similarly, siblings should communicate with each other openly regarding financial and other matters, such as taking care of parents. If a sibling helping parents expects to be compensated for their time or repaid for any financial outlays, this should be made clear at the beginning so that everyone can agree in advance.

In cases where parents wish to leave an unevenly distributed estate, for whatever reason, and fear that this may lead to conflict, they might consider using life insurance to make a bequest confidentially. Unlike a will, which is a public document, life insurance proceeds are kept private.

Another common parent trap is the family cottage. Conflicts can arise over the use of the cottage and the responsibility for its upkeep. Frequently siblings will divide ownership and maintenance costs equally.

Problems can arise if one sibling, usually by virtue of living closer or having more free time, uses the cottage more but expenses continue to be split evenly, says Mr. Sherman.

He adds that serious conflict can also erupt if some siblings want to cash out and sell the cottage while others want to keep it in the family.

Again, the solution is nipping these problems in the bud by having a written agreement stipulating what should happen under different scenarios.

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