Can you keep the Peace and Avoid Inheritance Squabbles in a Family Business?
Or do Inheritances and Family Squabbling go hand in hand?
Squabbles and family businesses, my favorite topics. This is where the lines between a “family dinner” and a “board meeting” are about as clear driving at night over age 50. All joking aside, transitioning a family business or deciding on the division of family assets amongst your family is complex and emotional. But fear not! With careful planning and following the tips outlined below you can avoid the drama that can tear families apart for many generations and avoid turning your family into a real-life version of the TV show “Succession”.
1. Communication, Communication, Communication
Ok, let’s talk about talking. I know, I know, discussing money and death can be a taboo topic in some families. But trust me, it’s necessary. Effective communication is the cornerstone to avoiding any family drama when it comes to estate planning. Start the conversations early – and by early, I don’t mean five minutes before you check out. Begin with a structured family meeting away from the holiday dinner table. It may be hard, but you could start by discussing your big picture vision of the company, and ask your family members to share their vision is as well. You may be surprised at the response. These family meetings are the perfect way to discuss opportunities and expectations you or your family members may have surrounding your estate distribution. Being proactive can help prevent misunderstandings and resentment down the road.
2. Fair Doesn’t Always Mean Equal
Your children are unique people, with their own abilities, personalities and interests. I know, it’s a shocker. But they each bring different strengths to the table. Not all will have your business acumen, but they are your children, and they will be included in your asset distribution. It is important to recognize their talents and interests when deciding on the division of assets. When dividing your assets remember that fair doesn’t always mean equal. Balancing their aspirations, talents and strengths is the key to continued family unity. Maybe one child gets more company shares, but the other gets the cottage. Make sure you explain your reasoning clearly, so everyone is on the same page, unless you want to ignite a family feud that can last for generations.
3. Document, Document, Document
Verbal agreements in family businesses are a good way to start a family war. Document everything, I mean legally binding documents, not a Post-it note stuck in your office drawer. Engage a lawyer who specializes in and understands the family dynamics surrounding family members in family run businesses. Making everything clear and binding will prevent the hiring of a litigation lawyer after the fact.
4. Prepare the Next Generation
To ensure a seamless, successful, argument free transition to the next generation, you need to prepare them for management roles in the family business. If possible, involve them in the business early to gain experience and insight into the workings of the business. The best way is to let them learn the business from the bottom up. Nothing builds character and earns respect like learning how to unjam the copier, answer the phone or deal with that one client no one wants to deal with. Consider enrolling them in leadership training programs or encourage them to engage a mentor to help them gain the skills necessary to take on their new positions with confidence.
5. Bring in Professional Advisors.
Bringing in non-family members can help keep things professional. Particularly a family business advisor to lead your family meetings, it’s like having a referee! Your advisors will bring in an unbiased perspective and help to guide the decision-making process. If your advisors all work collaboratively it will provide you with the best outcome possible to create and maintain your family legacy
6. Plan for the Worst
Nobody likes to think about worst-case scenarios, but it’s necessary and does happen, so plan for it. What if someone wants out? What if the business fails? What if someone gets divorced or married? Have contingency plans in place. It’s like I say to my kids, it’s better to have it and not need it than to need it and not have it. Having a clear process for any situation will reduce the uncertainty and provide a smooth transition.
7. Family, Family, Family
At the end of the day, what’s truly important is family. No amount of money or business success is worth destroying your family over. Encourage your kids to pursue their own passions, even if that means not coming into the family business. After all, having a happy family that gets together for holidays is worth more than any business empire.
Conclusion
Planning your family business inheritances and other estate assets doesn’t have to be a battle. With some planning and clear communication and you can keep your family strong and your business legacy thriving. Remember, at the end of the day, you’re not just passing down a business – you’re “passing down your success”.
As always “ Keep it in the Family” if you can.
Cheers,
Tammy