Estate Planning and Business Succession Planning in a Family Owned Business
When one child works in a family owned business many times parents are conflicted in an attempt to divide their estate equally among their children. Harry Gross recently offered his opinion on this topic.
Dear Harry: About 40 years ago, my father-in-law started a small manufacturing company. It has grown considerably. Recently, he gathered his children (my wife and her two brothers) to help him decide how his estate should be distributed. One of his sons works in the company, the other is a successful engineer, and my wife works as a stock-market analyst for a stockbroker. I’m a dentist.
A problem has arisen because of the business. Dad’s lawyer wants the value of the business treated like any other asset of the estate, except that he wants it all to go to the son who works with him. The rest of the estate consists of a little more than twice that, so it will not be a difficult division.
His CPA (one of your former students) wants to treat the business as if it were not part of the estate, but goes directly to the son he works with. He feels that the company is not really a disposable asset, but rather a means for his son to earn a living. He thinks the rest of the estate should be distributed equally. We are all reasonably well-off. Dad wants to know your thoughts.
What Harry Says: In my many years as a practicing CPA, I came across this situation several times. Each time, it was resolved by leaving the company to those working in it, and splitting the rest equally among all the descendants. In only one case did a quarrel result. I can see the arguments on the other side of this issue, but I have not changed my mind.
Reference: Harry Gross, Philadelphia Daily News, January 12, 2015
Filed Under Estate Planning; Business Succession Planning; Business Planning
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