A house divided cannot stand. And a barbecue pit divided cannot smoke.

A few years back, a famous restaurant called Kreuz Market in Lockhart, Texas, 25 miles south of Austin, became an object lesson for business heirs and financial advisors. Kreuz (pronounced "Krites"), which came into existence around the turn of the last century, became embroiled in an internecine family squabble after the restaurant's longtime owner had died and passed on the assets to his children. He left the business to his sons, but left the building it was housed in to his daughter.

It would seem to have been an equitable way to split up the assets between the children. Instead, the arrangement left two of the children with a bone to pick. One brother had retired when the daughter asked the other for a rent increase. The feud became public-even hitting the national news-and the brother eventually moved Kreuz up the highway while the daughter opened a new barbecue place, Smitty's Market, as a competing franchise under the old shingle.

The fracture in the family spawned two kinds of barbecue from the house divided. Good for barbecue fans, maybe, but not for family values.
It's a common occurrence in family planning: A road to hell paved with good intentions-usually the desire of parents to leave behind an equal legacy for all their children. But nothing looks the same after it's been through the sausage grinder of estate planning.

The problem is, say advisors, that it's not always easy or even desirable for a paterfamilias to carve up a business 50/50 (or in thirds). For one thing, one of the children might have been working in the business all his life and might feel more entitled to it when the parents die, even if another child feels he or she is getting short shrift. Another child might be cash poor and need to liquidate things like businesses, land, houses, jewelry, etc. Or the business might be left to more than one sibling, and the child who labored in the salt mines all those years suddenly finds himself with partners among his own family-people imposing their will on a business they know nothing about. In fact, planners say, it's that very moment when parents say everyone will get an equal amount that the trouble always starts.

"The formula for disaster is to let the children inherit the business equally when one's working on it and another is not," says Stewart Welch III, an advisor with the Welch Group LLC in Birmingham, Ala. "That is almost guaranteed where you're going to create conflict in the generations."
But there are many ways to skin the cat-the most obvious one being to use life insurance, which would give the child who is not in the business an immediate cash stream tantamount to a stake in the business. This is usually the first plan.

"Say [the estate] is worth $3 million, and $2 million or $2.5 million of that is life insurance," says Welch. "So it's cash. The one child inherits the business worth a million and that is verified by a third party, and the other two children get a million in cash and everybody is free to do their own thing. The child with the business might do better than the children who inherited the cash or might do much worse. But everybody takes their chances."

Besides paying off the children, life insurance can also give the child who inherits the business some cash flow to tackle thorny estate taxes.
But what is demanded in every case is lots and lots of talking beforehand to understand what the parents really want, and to do it before they die.         Welch calls these meetings "family councils," in which issues of jealousy and questions about what is really equitable or fair come out long before the matter becomes an all-out war between siblings over longtime slights both perceived and real. He holds them every two or three years.

"We often see resentment where a child inherited the business," he says. "'Oh, he was the favorite child and look how much he's worth.' ... So he got a business that was valued at a million. Ten years later it's worth $6 million, and they're worth $1.3 million. And they think [the child in the business] got the charity of the estate. And the reality is that he's the one who took the risk."

Norm Mindel, a financial advisor and lawyer with Genworth Financial in Schaumburg, Ill., says that disputes like the Kreuz barbecue feud are almost predictable. "You've got to have the deal cut while everybody is still alive and somewhat rational," says Mindel. "And when you look at this, you've got to figure out now not only what is reasonable for the rent, but what is also going to placate the non-working children." The rent must be reasonable to the family as well as the IRS, and an agreement should provide for the rent to go up with inflation so that both parties feel reasonably compensated, he says.

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