Dear Quentin,
My sister is two years older than me.
We both are married and have incomes in the low six figures, and our husbands have similar earnings.
When she was in her 20s, my sister and her husband accumulated a lot of credit-card debt, which my parents paid off (twice). I think it was around $50,000 each time. I have always been fiscally responsible and never needed my parents to bail me out.
My father, may his memory be a blessing, invested in oil and gas partnerships around that time, and created a corporation with me and my sister as shareholders. In consideration of the fact that they had paid off my sister’s credit-card debt, my parents set up the company so that I had a slight majority of the shares.
We get hundreds of thousands of dollars in royalties. So, the slight difference in our percentages of the company means that I have received more dividends than her. I have not done the math, but I imagine it’s in the tens of thousands of dollars ($100,000 or more).
“Your father gave you controlling interest for a reason. He knew you would take care of the partnership, manage it and make sure that no one made any hasty decisions that would jeopardize your future. ”
If your sister receives 40% or 45% of the income from these investments, by all means bump her up to 49%, but make clear that there is a price to be paid for the time you invest, and pay yourself a market rate. If your sister expects to sit back and receive an income while you do all the work, that is a sign that the poor fiscal planning that got her into debt in the first place remains. You don’t want to tie your financial future to another person, whether it’s your sister or someone else.
The same goes for your vacation home. If you wish to use some of the income from your inheritance for a vacation home, great. But I urge you to think twice before buying a home with your sister. Once again, past behavior is the best predictor of future behavior. You don’t want to end up paying all the maintenance and taxes, and dealing with the paperwork and covering any mortgage you may have, while your sister takes a break and a Kit Kat in back seat.
Your father made sure you had a controlling interest. He did that in order to protect you and your sister. He was a smart man.
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