Estate
Planning with Family Relationships in Mind, Part I
The value of family meetings to
think about how to transfer a business to the next generation.
At
a recent board meeting of the Juan Perez Mall Pizza Franchise an amazing
event happened.
The two sons who had been running the business successfully for
years all of a sudden found themselves looking for a job.
Their Mother and two sisters had voted to strictly curtail their
activities and were bringing in a new Management Team.
The family, which was never particularly close was now on the
brink of disaster a few short years after the death of the patriarch.
As the sons walked out of the meeting, one whispered to the other
“I think its time to call our lawyer.”
High on the list of difficult subjects for families and others to talk
about is money and inheritance. In the literature on addictions and
other family dysfunctions, family therapists often call this the
proverbial “elephant in the living room”. This metaphorical
expression is used to describe a situation when a family is sitting
around their living room, and in the middle of the living room there’s
an enormous elephant standing in it which no one mentions.
So it often is with money and inheritance.
This
is a case
in point.
Papa Perez was a good man, who has worked very hard his whole
life building his restaurant business from one small restaurant to ten
establishments across Colombia.
He and his wife had four children, two sons who have been working
in the business for over twenty years.
The third, Maria, an architect who married an American Surgeon
and lives in Baltimore.
And lastly, there is Sally who never married, has had trouble
sustaining a job and lives alone in a small apartment in Bucaramanga.
Maria, Sally and their Mom have been very close.
Likewise the two sons are a good team.
Little
attention has been paid to estate planning.
About twenty years ago, on his wife’s insistence, Papa Perez
went to an Estate Planner who assisted him drawing up the papers making
sure that he stayed within the law and avoided as much taxes as was
legally possible.
Papa found the whole experience rather unpleasant and was focused
on not paying too much in legal fees.
Papa
Perez, as is often the case, had been holding the family together,
solving sibling rivalry issues, sending money to his daughters to help
them out and providing for his grandchildren.
He had not had any substantive discussions with his wife or
children about his wishes to hold the business for the third generation
or a way for shareholders who were passive owners to be bought out of
the business if that was their wish.
He never conceived that he was leaving his sons with an enormous
burden of of dealing with their sisters as owners of a business they
were never interested in.
Obviously
estate plans have an enormous impact on the family. When a business is
involved, the relationships and financial issues are ever more complex.
The key is looking at the needs of the patriarch, of his wife,
each child and the business.
Careful planning should be facilitated by the Estate Planner to
begin these discussions in the family – while the patriarch is alive.
Although these discussions are extremely delicate, they are part
of what can preserve the family and the business.
Marc
A. Silverman is a family business consultant practicing in North and
Latin America. He can be
reached at marc@sii-inc.net.
