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Maintaining Family Harmony

Submitted by John Brown on Wed, 05/14/2014 - 3:02pm
Image with a Family Cutout on Hands

Like most valuable things in life, I learned about the importance of family harmony the hard way.

My phone rang early on January 2.  It was Frank, an owner who had gifted, with my help, some of his business interest to his son.  His first words were not, "Happy New Year!" but "Undo that gift!"

Six weeks earlier Frank Sr. (Senior) had given his youngest son, Frank Jr. (Junior), part of the business interest.  Junior not only ran the business with his dad but had become more important to the company's success than Senior.  For that reason, Senior had decided to gift a significant part of the very successful business to Junior.

Senior arrived later on the day he'd called--and 20 minutes early--for a hastily arranged appointment.  Suspecting that Senior might be just a little agitated, I asked, "What has you so upset about the gifting?"

Senior's answer poured out, "Jean and I had all four kids and 11 grandchildren over to the house for a holiday dinner.  My oldest daughter, Linda, noticed that Junior's kid had on a pair of red Jordan Super Fly basketball shoes.  You know, the $190-a-pair shoes?"

Before I could answer, Frank went on, "Linda then cornered Jean in the kitchen and told her that her kids couldn't help clear the table because they were too embarrassed to be seen in their $29 sneakers from Target.  Linda then complained that since Frank Jr. was now earning more than he could ever have hope to outside the business, 'This is beyond unfair!'"

Senior continued, "At this point, I walked into the kitchen--now a hornets' nest of moral outrage.  I was prepared to face the 'you always liked him best' routine.  I reminded Linda that I'd offered her (and her sisters) the same opportunity to work in the business, but they'd all chosen different paths.  I told her that her brother was responsible for increasing the value and cash flow of the company--something he'd done working 60 hours a week!" 

"That wasn't good enough for either one of them!" explained Frank.  "Somehow I have not only violated some unspoken Family Code, but now Jean isn't speaking to me!"

As I listened, I realized that Senior blamed me and expected me to extract him from this mess.  He wanted me to right the ship of marital bliss by ensuring that all his children felt that he treated them equally.

And he was right.  It was my fault...for not requiring that Jean be present at the meeting during which we discussed gifting to Junior.

Frank and I had paved the road to family conflict with good intentions.

We Are Family

Everyone agrees that family harmony is a desirable goal, but not everyone appreciates how easily it can be destroyed.  As sexist as this may sound, Frank's situation taught me that owners (male owners) typically do not have a good sense of either how their children perceive that parent/child relationship or of the relationships among siblings.  While both Franks were oblivious to how the business transfer might affect Senior's other children, Jean, their mother-bear protector, was not.

Had she been present at our planning meeting, she could have told us how the transfer would affect each member of the family.  We would have asked Jean, not only about whom to consider (stakeholders) but also how they might react.

I always encourage male owners considering a transfer to a business-active child to take advantage of their wives' more finely tuned social and family antennae.  Generally, men are not only oblivious to (or in denial of) many of the hidden tensions in any family, but they are too focused on the business family to think those tensions will matter.

If you are considering a transfer of business interests to a business-active or inactive child, talk to your spouse, then with your exit-planning advisor.  That advisor can help you to design and communicate the transfer of assets in a way that demonstrates equal care for all parties involved.

If the potential for a serious rift in your family is great, bring in a trained family business consultant.  This may sound extreme, but I know--from experience--that it is not.  The chance that you'll enjoy holiday dinners with your family is far greater if you address potential conflict before making transfers than it is after.

Righting The Ship

We repaired the division in Senior's family by providing Junior's siblings with ownership of real estate and other business interests.  They were satisfied, but not especially pleased.  Had we anticipated their reactions it is possible that Senior could have pleased his other children--if not with the gift itself--with his unusual generosity and thoughtfulness.

Luckily, family harmony issues arise only in exits involving transfers to one or more children--unless, of course,a child expects to receive a business and the parent pursues another exit path.

Frank and I will never again forget to communicate with our spouses before we take any action regarding our children.  In Exit Planning, I suggest that you , too, start there.  Then talk to your Exit Planning Advisor about moderating a family meeting to explain how your gifts benefit all.  Finally, don't forget to toast Frank at your next family holiday dinner.