The Sibling Sinkhole
How showing a little brotherly love can be an expensive proposition

When Greig Detering left behind his comfortable life as a telecom engineer and set out to do missionary work abroad, he had a powerful calling — but not a lot of financial firepower. While he owned a home in Phoenix, he says, he lost most of his nest egg in 2002 when his employer’s stock dropped from $83 to (ouch) $2 a share. Fortunately, after his own resources ran dry, Detering’s fledgling ministry found a steadfast benefactor who kicked in $5,000 to $20,000 annually for several crucial years — to help support his evangelistic efforts across more than a dozen countries. And when Detering, now 54, began looking for a “transportation and communications hub” for his South American operations, the same supporter kicked in $120,000 to purchase a Buenos Aires condo in a deluxe residential tower, complete with a pool, a fitness center and conference rooms. It wasn’t the larger option on the higher floor that Detering had originally proposed — but, hey, a kid sister has to set some limits.

Jim and Bill Rodgers used a contract to make their bro-to-bro loan official.

It didn’t hurt that the sister in question, 53-year-old Diane Paddison, had been chief operating officer of two Fortune 500 companies and, Detering admits, had done a better job of managing (read: diversifying) her nest egg. It also helped that she and her husband, Chris, a management consultant, found Detering’s missionary work in keeping with their largely faith-based philanthropy. Then there was the fact that they “learned to take care of each other,” Diane says, when they were growing up on the family farm. But while Detering says the property has appreciated 25 percent in value since 2007, owning real estate overseas turned out to be a huge administrative hassle; in fact, much of that gain was offset by the $20,000 cost of officially transferring the title to his ministry. Ultimately, says Detering, “it was really just them helping me out.”

Say, Brother, can you spare a…few thousand bucks? We’ve all heard about the so-called sandwich generation, anxiously watching as its retirement savings are chipped away by the needs of aging parents on one side and boomerang kids on the other. But financial planners say that few people factor in the impact of other family members — that is, financially challenged siblings — who might sheepishly slip in a loan request while helping dry the holiday dinner dishes. Sometimes — like when the contributing sibling can afford to provide the help, as with Detering and Paddison — the arrangement can work out well. (Bonus points when the borrower’s needs align with the lender’s charitable values, and when the receiving sibling isn’t addicted to gambling, controlled substances or daytime TV.)

But experts say that in this unforgiving economy, baby boomers in particular, many of whom grew up in fairly large broods, are seeing a bump in financial requests from close kin who lost a job, ended a marriage or — sounding familiar yet? — got caught in the housing bubble. According to a recent MetLife study, nearly half of Americans say they gave money to a family member in the prior year to help pay bills. And as boomers move beyond their prime earning years, experts say, requests will likely accelerate. Forecasts of historic wealth-transfer windfalls (aka inheritance) for boomers in the coming years are overstated, reports AARP’s Public Policy Institute. What’s more, the Employee Benefit Research Institute predicts that nearly half of Americans ages 36 to 62 may not be able to afford even basic living expenses in retirement.

Help This Way, Not That

Helping a sibling often goes about as smoothly as a family vacation, say financial advisers.

Which means you probably don’t have to look too far down the Thanksgiving table to find a struggling sib. Maybe it’s the chronically underemployed one (whom one wealth manager jokingly labeled “the family liberal arts major”) who has lost a spousal or parental safety net. Maybe he or she is part of the rising tide of American boomers without health insurance (nearly one-fifth of 45- to 54-year-olds in 2010) who could develop a costly medical condition. And with the divorce rate for the over-50 set doubling in the past 20 years, it might be a marital rupture that brings the person you once shared a bunk bed with back to crash on your own kid’s upper bunk — while bumming money for everything from gas to his children’s college tuition. In a recent retirement study by Charles Schwab, a whopping one-fourth of respondents said they’re worried they will have to financially support their siblings. And as the postwar babies try to steer their own ships into a safe retirement harbor, says Gary Gilgen, director of financial planning for Rehmann Financial, an advisory firm with some $2 billion under management, the last thing they need is extra cargo: “Some of them really can’t afford it.”

That financial pressure could make a tough — and often fraught — decision to mix blood and bank accounts that much tougher. “Money often is the adulthood trigger for childhood issues,” says Suzanne Slater, a Northampton, Mass.-based psychotherapist specializing in family wealth dynamics. On the asking side of the equation, experts say, the risk includes not only the shame brought on by sibling competition and the resentment of being beholden, but also the prospect that a buttinsky brother or sister will feel justified in doling out heavy doses of advice with their dollars. There’s also the “hidden string” factor, where the receiving party is pressured to, say, spend weekends expressing gratitude by cleaning his brother’s gutters.

Diane Paddison’s success as a COO let her give thousands a year to her brother Greig Detering’s passion project.

For the giver, problems start with the strong prospect that a family “loan” — especially an undocumented one — can be as good as money flushed. “Precisely because a sibling loves and trusts you, they may expect you to understand when there’s a barrier to repayment,” says Timothy Burke, CEO of Massachusetts-based National Family Mortgage, which facilitates loans between kin. Indeed, financial therapists, a new breed of psychologists who help people understand their money-related behavior, say the line between compassion and enabling is frequently a blurry one. Plus, the situation can easily rankle a lender’s spouse, who may be less inclined to allocate hard-earned marital assets to a brotherly bailout. But as the economy leaves many Americans struggling to pay for basics like homes, health care and higher education, more will be facing the question of who they are willing to backstop in life — and to what degree. “I’m definitely seeing more noise and discussion about siblings,” says Erin Botsford, a Dallas financial adviser and the author of The Big Retirement Risk, who says she’s seen such requests jump 20 to 30 percent in her practice in the past few years. “To ignore them is to the clients’ peril.”