Let me start with this disclaimer. This post may seem like an anti-legal polemic. It is not.
I have many, many colleagues and friends who are attorneys. Because I specialize in business succession, exit, and transition, I work with business transaction attorneys, estate planning attorneys, planned giving advisors, tax accountants, financial planners, and wealth managers regularly. I insist that my clients get the best counsel possible and use professional counsel. I value their work.
As I am not a specialist at all in the area of estate planning, tax planning, or asset protection, I get overwhelmed easily by the number and variety of means available for achieving those ends and at how complicated they can be. Recently, I had two occasions where I was exposed to some of the more advanced methods of planning. One was an article from a professional journal on trusts and estates referred to me by a highly valued resource. The other was a talk presented by a leading advanced planner at one of the major national banks. The gist of both was how the use of some very interesting, effective, and complicated mechanisms could unwind difficult family succession issues or wealth transfer issues.
Why Are They Complicated?
The cases focused on situations where the original business owner(s) had attempted to leave equal shares of their wealth to heirs – the primary source of wealth being in the form of the owners’ businesses. They chose to transfer their wealth by distributing shares of the business. The heirs often included multiple generations with few of them having been involved with the businesses. This resulted in segmentation of owners with varying and conflicting interests. The cases being discussed recommended a variety of complicated techniques whereby the conflicting interests of the various parties could be mitigated.
As a non-legal, non-trust planning person with my own experience dealing with these types of conflicting interests, the thought that kept coming to me was “why had these situations gotten this difficult and/or complicated in the first place?” Extrapolating from my experience, I assume if we had been able to study these cases in depth we would find that the owners who had initiated them most likely avoided hard decisions or assumed that their heirs would be able to work things out. Both of these are very common and both are mistakes!
Next week, I’ll give you my very simple solution to these business exit and succession complications.