I Think My Brother Is Trying to Steal the Family Business. My Parents Refuse to Get Involved.

Pay Dirt Photo illustration by Slate. Photo by NejroN/Getty Images Plus. Pay Dirt is Slate’s money advice column. Have a question? Send it to Kristin and Ilyce here. (It’s anonymous!) Dear Pay Dirt, My parents own a luxury sales business, and my brother has worked there for the past 20 years. My mother works there too, but always dissuaded me from going into the family business because it’s very customer service oriented, and she thought I’d want a career with more work/life balance. Instead, I started my own business more 20 years ago, and it has been very successful. Now my parents are retiring and my brother wants to take full ownership of our parents’ business. But how he wants to do it is fishy. We hired a business valuation firm to value the business and they valued it at $1,000,000. My brother says this is wrong and it’s truly not worth “anything.” He wants me to let him have it outright for free so he can work to save it. He claims it’s bleeding money and that he will work to salvage it, but he doesn’t want to do so to “benefit me” (his sibling). I hate to think he is manipulating me, but it seems like he is? I appreciate he has been working there and I haven’t done anything to help, but I do worry he could sell the business in the coming years and make a ton of money and I would resent that. He and I both have three kids each (all in their teens), and my kids want me to maintain a share of the company in case they want to be involved in the future. Do you have any advice on how to move forward with my brother? My parents say they want to stay out of it. —Is My Brother Cheating Me? Dear Is My Brother Cheating Me, A million dollars and “nothing” is a pretty big gap! If your parents want to stay out of it, that’s understandable, but then it’s time to talk to a lawyer. In fact, it’s a good idea to talk to a lawyer anyway. Family businesses get complicated quickly, especially when there’s a transfer of ownership, the valuation is murky, and the next generation might want to be involved in the future. A lawyer will help you navigate all of that. They’ll make sure the transfer is handled properly so there are no surprises later. A lawyer should be able to help give you some guidance when it comes to the tax implications of selling the business, too. At the very least, if your brother disagrees with the valuation, the next step is to get a second independent valuation, rather than simply assume the business is worthless. When you talk to your brother about going this route, frame it as a solution for all of you that will help avoid any conflict. You can tell him something like, “I hear you, and you’ve had a firsthand look at how the business is handled for the past 20 years, but having some professional guidance will make sure we’re doing everything right.” Even if you and your brother reach a compromise on your own, a lawyer can still help you draft a formal agreement, which will prevent misunderstandings and resentment down the road. It’s hard to say whether or not he’s manipulating the situation, but the fact you’re worried about it in the first place is a good enough reason to get some outside help. Please keep questions short (<150 words), and don‘t submit the same question to multiple columns. We are unable to edit or remove questions after publication. Use pseudonyms to maintain anonymity. Your submission may be used in other Slate advice columns and may be edited for publication. Dear Pay Dirt, This might be the dumbest possible question you’ve ever gotten. I set up 529 accounts for my two kids when they were each born in an ill-fated effort to be responsible. At some point, I decided instead of putting in a lump sum every once and a while, I would put in reccurring payments. Great, right? Over the last year, I noticed that the accounts were not going up as expected, but my kids are little and didn’t think much about it. Welp, I looked yesterday and it appears that over the last year and a half, I have been withdrawing $700 from each kid’s account each month, and then depositing $650 into the accounts at another point in the month. Exactly how that happened is probably not worth explaining, but I feel like an idiot. I have hopefully fixed this, and I added money to the accounts for good measure. But, do I owe taxes? For what its worth, I have definitely spent $700 on school expenses for one of my children every month, but arguably less for my older child (although definitely over $1,400 all in). Are the 529 gods going to rain hellfire down upon me? There are no tax forms generated on the site for me, but that doesn’t feel like tax advice. This is really, really dumb. — Worst Tax Fraud Ever? Dear Worst Tax Fraud Ever, Oh no! It’s an honest mistake, not a dumb question. Setting up this kind of stuff never feels as straightforward as it should, and we all make mistakes. Onto your question, though. Here are the basics of how it works: If the money you withdrew was indeed used for qualified education expenses, then the withdrawals are tax‑free and you don’t owe federal tax or penalties. But if the withdrawals were not used for qualified expenses, the earnings portion of those withdrawals is taxable and subject to a 10 percent penalty. You should get a Form 1099-Q for the year(s) you accidentally took those distributions. The key issue for taxes is whether the money you withdrew was used for qualified education expenses, because 529 withdrawals are tax‑free when they’re used for things like tuition, fees, books, supplies, computers, and up to $10,000 per year of K–12 tuition. You mentioned that one child definitely had $700 per month in school expenses, which likely qualifies as K–12 tuition. For the older child, you spent less. But if those expenses were tuition, then the withdrawals are tax‑free. If they weren’t tuition (for example, if they were after‑school care, sports, or other non‑qualified costs—then only the earnings portion of the withdrawals would be taxable, plus a 10 percent penalty on that earnings portion). The contributions are not taxed. You likely haven’t yet seen any tax forms because 529 plans only issue a 1099‑Q after the end of the tax year in which withdrawals happen. When the form arrives, it will show how much of each withdrawal was contributions versus earnings. Even if some withdrawals turn out to be non‑qualified, the tax impact is usually small because newish 529 accounts typically haven’t accumulated much earnings yet. So how does the IRS know what you spent the money on? They don’t pre‑approve expenses, don’t match withdrawals to school bills, and don’t get any information from your child’s school. The rule is basically, “keep your own records in case of an audit,” and audits are rare. If you are audited, all you need is documentation—tuition invoices, school statements, bank or credit card records—showing that you paid qualified education expenses in the same year you withdrew the money. When you do your taxes next year, I would work with a tax professional just to be on the safe side and explain the situation to them just to cover your bases. But in short, the 529 gods are not angry. Maybe just a little frustrated. You fixed the mistake, added money back in, and the worst‑case scenario is a modest tax bill on the earnings. —Kristin Classic Prudie I (16F) work as a counselor at a local after-school program. It pays really well, my boss is very nice, and I enjoy getting to try new activities with the kids. I recently had two little boys join my group of second and third graders. They are brothers (7 and 9) and are really sweet, goofy kids who have adapted well to our program. They are also pale, blond-haired, blue-eyed kids named “Rakhi” and “Bodhi,” and I am an Indian American who was raised speaking Hindi and English. I don’t have an issue with their names, but their mom has an issue with me. Never miss new Slate Advice columns Get the latest from Prudie and our columnists in your inbox each weekday, plus special bonus letters on Saturdays. Advice Family Personal Finance