The nonbusiness side of family business

posted 1/10/2014 in Trust

The nonbusiness side of family business


What happens when some of the children are active in a family business and others are not? How can one treat all the heirs “equally”?


This is one of the knottier problems in estate planning. The resolution could involve having voting and nonvoting ownership interests, for example. If the owner’s estate will include significant
property outside the business, that may be used to “balance the scales.”


Another idea to explore is the use of a trust to manage the ownership of the business. This can provide for greater flexibility, while protecting the business assets from claims by creditors of the heirs. A trust may be used to address what has been referred
to as the “four D’s” of estate planning:
• death;
• disability;
• divorce; and
• drug dependency.


Perhaps that’s five D’s after all. The trust document will outline the hopes and expectations of the trust creator, regarding both the operation of the business and the rights of the beneficiaries. The trustee may be given considerable discretion, if that is appropriate.


A professional, corporate trustee, such as us, may prove invaluable in these situations, especially if family harmony is less than perfect. We invite your questions, if you own a family business.

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