But while divvying up the family home is nettlesome, dividing the family business is a minefield. Nearly every advisor interviewed for this story had a client involved in a family-business-related drama that wound up in court. Even parents who plan ahead can't always save the children from themselves. One father made sure his daughters could monetize their shares but gave his son-the only child who actually worked for the company-ultimate veto power over whether the business should be sold. In the end, the daughters were so persistent and menacing, the son sold the business just to stop them from badgering him.
The worst case involved a man who was so daunted by the prospect of having to work directly with his two brothers in the family business that, rather than negotiate with them through a trustee, he began to abuse drugs and alcohol. He was the only one of three sons to work for the family business, and his brothers had concerns about his compensation and how he was running it. Until then, his brothers' interests in the firm were held in a trust, but the trust was slated to expire, giving the brothers more direct control over the company. The brother who worked there wound up killing himself in front of his son.
"Some of that was obviously caused by the drug and alcohol abuse, and the irrational behavior that goes with it. But it was also the reality that he was going to have to deal with this antagonistic relationship," says Simon Singer, a financial planner in Los Angeles.
Valuing one's interest in the business is also a sticky point. In one family, two sons owned a business, but only one worked there, and the one who didn't was always envious of the perks his brother received. There were rides in the company's private plane, access to apartments in Manhattan and Naples, Italy. The problem was, because it was a privately held company, it was hard for either brother to sell the stock. To resolve the issue, their lawyers created a limited marketplace for the stock, and every year, a valuation of the business was done so a price per share could be established. That enabled anyone, whether it was the brothers or their children, to sell their stock back to the company in order to cash out. There were certain rules, such as limitations on how much stock could be sold at once, and the fact that once the stock was sold, it couldn't be bought back.
"You're taking something that is generally indivisible, such as shares in a private company, and making it so that anyone can monetize their stock," says Michael Golden, a partner at the Atlanta-based law firm Arnall Golden Gregory, which specializes in business succession planning.
Interestingly, as soon as everyone was able to sell their shares, the squabbling stopped, Golden says. Knowing they had the ability to sell their shares, they realized they didn't really want to.
Golden's partner, J. Grant Wilmer Jr., who works in the firm's private wealth group, knows of two brothers who inherited a business from their father and got along very well for much of their work life-until it was time for their own children to run the business. One brother made his son president of the company, a position for which the other brother said the son was not qualified. Instead, that brother wanted his son-in-law to be president, claiming the son-in-law was far more suited to the position.
The situation became so acrimonious they decided one or the other should leave. They entered into a so-called "buy-sell agreement," in which the party wanting to either buy or sell gets to pick the price of the shares to be sold. The other party then has the option to buy or sell. It's supposed to keep people honest, because the person valuing the price of the shares can wind up either as buyer or seller.
"The interesting thing was, these were two brothers who had been in business together for many years, and at the end of the sale, not only couldn't they be in the same conference room with each other, they couldn't be on the same floor. We didn't want them to run into each other in the bathroom," Golden says.
It didn't help that the brother who bought the other out had to take on a private equity partner in order to afford it. After a few years, the company was unable to reach certain benchmarks promised to the private equity partner, so the partner stepped in and kicked management out. In the end, the company went bankrupt.