The now-famous rivalry between Ranbaxy brothers Malvinder and Shivinder Singh, which shattered their business and friendship in 2018, was not an isolated incident.
Many houses have a microcosm of siblings fighting over money, whether it’s for inheritance and property, outstanding loans, or their parents’ medical care. Some of the top reasons for sibling strife, according to a 2017 Ameriprise poll, are inheritance division, expenses over parental care, differing money values and habits, varying levels of income, and money repayment.
“However, from a financial and personal risk management standpoint, it’s an idea to avoid,” says Dinesh Rohira, Founder & CEO of 5nance.com. “If it’s impossible to avoid,” he continues, “it should be carefully described in an agreement so that there are no uncertainties later.” Talking and planning, in addition to paperwork, are helpful in resolving financial problems. Maintaining open channels of communication can help siblings not only clear up misconceptions, but also plan for scenarios that may cause a schism, such as parental care.
If you’re experiencing a financial difference with a sibling or contemplating a transaction with them, read this article to learn how to proceed.
Find out what questions you should ask, measures you should take, and foreplanning you should do whether buying a house together, being a guarantor, investing in your sibling’s business, or dealing with inheritance.
Should you purchase a home with a sibling?
When you’re young and unmarried and want to buy a house but don’t have the money for a down payment or loan EMI, it appears that enlisting the help of a sibling is the easiest alternative.
While there are advantages to this decision, it may also make life more difficult in the future If you’ve already purchased a home, it’s a good idea to sell it and split the proceeds before getting married. If you’re thinking about purchasing one, keep these things in mind.
Larger loan and house; expenditures split: If siblings apply for a joint home loan, the loan is calculated using both of their salaries. This entails a greater mortgage and a larger home. As a result, teaming up with a sibling can boost your purchasing power.
Both get a tax benefit: The joint applicants and owners each get a tax credit of Rs 1.5 lakh for the principal returned under Section 80C, and Rs 2 lakh for interest paid for self-occupied property under Section 24, providing the house construction is complete.
The interest is paid in the same proportion as the siblings’ ownership share.
Death can make the transfer more difficult: if one of the brothers dies, his share will not be passed on to the other brother. “Only your mother, spouse, and children are class I legal heirs; siblings are not.” “As a result, after the sibling dies, his legal heirs can make the first claim on his portion, resulting in litigation and inheritance disputes,” explains Pankaaj Maalde, a Mumbai-based financial planner.