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Over the past few years, I’ve been helping one of our clients transition their family business from generation one to generation two. In that process, two factors require intentionality and care:

  1. What will happen to the business itself?
  2. What are Gen 2 expectations in terms of the estate?

In this scenario, the client decided that one sibling from Gen 2 would lead the next chapter of the business. As you may assume, this is one of those scenarios where “fair” does not mean taking the asset’s value and dividing it by the number of inheritors.

Now that we’ve answered the first question for this client, we are in the process of navigating the second one, which concerns Gen 2’s expectations.

One of the children assuming ownership of the business evidently creates complexity in the family’s estate. What’s best for the business (in this case, one inheritor assuming ownership) doesn’t create equal portions for the other siblings. The best way to navigate this is often by opening lines of communication and patiently exploring possible solutions.

We’ve walked this road with many family-owned businesses, and I’ve seen very different solutions produce equal amounts of peace. In one case, a family may make other siblings non-voting shareholders with proportionate distributions with the option to be bought out. In another case, I’ve seen families peacefully divide what remained of the assets between the remaining siblings.

The key here is to uncover your family’s expectations based on your continuity plan. Your family dynamics are unique, and when possible, it pays to engage in open dialogue. Durable peace is more often a result of healthy expectations than large sums of capital.Many of you, our clients, have built your wealth with family-owned businesses. Whether you are nearing your finish line or it feels far off, this is a conversation worth having. By opening the family dialogue early, your business is more likely to be a blessing to the next generation–and not a cause for conflict.