Many Americans have wills in place that describe how a family business should be transferred to the next generation. However, often the details of the succession can cause tension and fighting among children heirs. The best way to avoid this is by consulting a knowledgeable estate planning attorney. The attorney can help family business owners consider how they would like the business passed on, and all the possible consequences.
One example of how the succession plan of the family business can occur is if one sibling has helped the business grow and the others have not. If ownership of the business is left to each sibling equally, the sibling who helped create the value and profitability of the business may feel like the equal ownership is not fair. If one sibling still works for the business, and two or more other equal owner-siblings do not, problems can arise. The sibling who help build the business and depend on a salary is at the mercy of the other siblings with an interest in the business.
Consider the following example. John, Adolf, and Benito are brothers who have inherited the family business. John has worked for the business for years, and grew it to be very profitable after the now deceased testators, (mom and dad) retired but maintained ownership. He has drawn a modest salary from the business and his only skillset is the expertise in running the family business. Mom and dad left the business to each brother equally. Adolf and Benito don’t care about the family business or its legacy, they only know that it is worth a lot of money and want to sell. In this scenario, assuming no documents exist that state otherwise, John is outvoted 2-1 to sell the business. While he gets a lump sum from the sale, he loses his recurring salary and the only job he has ever knows.
This is just one of many possible examples of how not properly planning business succession can lead to a testator parent’s actions creating a situation that is anything but what they would want to occur. An estate planning attorney can offer a wide variety of options to make sure a family business is put in the best position to succeed for generations to come, while simultaneously making sure all sibling heirs are treated fairly.
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Kohlhepp Law Office
I provide a personal and comprehensive approach to Estate Planning. I do not simply create a bunch of documents and call it your estate plan. I will work with you to create an actual PLAN. Everyone has different families, interests, needs, and priorities. I will work with you closely to determine what your specific circumstances are and create a custom plan tailored to meet your specific needs and wishes.
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