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Unequal but fair: Dividing wealth when there’s a family business

On Behalf of | Apr 18, 2017 | Business Law |

How do you divide an inheritance up between your children when the majority of your assets are mingled with the family business?

It might not be practical or even desirable to hand the business over in equal shares to your heirs. They may not all have the same business aptitude or interest. One may have already invested his or her time and energy into making the business grow while another explored different interests.

At the same time, it’s important to remember that children often see inheritance as a demonstration of how well they were — or weren’t — loved by their parents. If a child perceives an inheritance as unfair when compared to what is left to your other children, ugly battles can erupt that can destroy your remaining family and eat away at the majority of the wealth you’ve left behind.

What are some potential options for making the inheritance split fair, even if it isn’t even?

— Life insurance policies can help satisfy your goals and your heirs. For example, if you have a sizable insurance policy (or can get one), you can leave the cash from the policy to your heirs who aren’t involved in the business. That leaves the business intact and in the hands of the heir who is already invested in its development. That sort of arrangement can leave everyone more satisfied.

— Divide the business between the heirs in such a way that the child with the interest in owning it retains control and has to either buy out the other heirs or pay dividends out of the profits. That could help resolve any questions about fairness if the value of the business at the time of your death isn’t really something you can even estimate right now.

— Sell the business to the child who has already devoted so much time and effort to it before you die. If you’re ready to retire, it may be time to hand over the reigns now. Since your child is buying the business, that moves your wealth out of it. You can then put that wealth into assets that are easier to divide evenly.

Whatever you decide you should do, consider talking to a business attorney for planning advice. For information on how our firm can help, please visit our page.


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