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Joan M. Ridley
Pres., CFP™, CEPA, CBI

2911 Turtle Creek Blvd., Suite 300
Dallas, Texas 75219

E-MAIL:  info@businesswealthsolutions.net
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A Legacy of Peace or Turmoil – It’s Your Call


Joan M. Ridley, CFP

True Story…

A distraught 40’s something woman, call her Sarah, phoned me about two months ago and shared the following story. “My father walked into his place of business last week, told his secretary a joke, and then dropped dead at his desk. My parents were divorced and my mother has a serious illness. We buried Dad yesterday. I had been after him for a long time to write a will, but I don’t know if he ever did”.

I was saddened by Sarah’s story and was curious as to why she would call me. “We found information about your company spread out all over his desk when he died. We were hoping that maybe you had been helping him with his estate plan.” Unfortunately, her father had never called us. “My brother-in-law works in the business and has taken over to the point where I can’t even find out what’s going on. He won’t share any information with me. My son” (call him Tom), “works there too and I want to protect his interest in the business.” I asked her what she wanted to happen. She responded, “If we sell the company, I want to use some of the money from the sale for my mother’s care. I also want to be sure that our 50 employees are treated well by the new owner. If we don’t sell it, I need to know that our family business, that has served our customers for over 35 years, remains healthy and continues to grow and provide for our family and for our employees. Once we get my dad’s situation under control, I also need to do estate planning for myself. I don’t even have a will”

The funeral had just occurred the day before, so Sarah and I agreed to talk again soon to see how we could be helpful to Sarah and her family. She and I had several telephone conversations over the next two months. I suggested steps she needed to take to protect her family and the business. During our conversation just before Christmas, she asked if I would call her right after the New Year to set a time for us to meet with her and her family. I was aware that other family members probably had their own viewpoint which I would discover at that time. When I called this morning, as planned, I was told by a key employee that Sarah was killed last evening in an auto accident. (Subsequently, I learned that her mother had been killed in the same accident). I was shocked and saddened both for her son, her sister, the rest of the family, and for their employees. I composed myself and offered to meet with the family members, at an appropriate time, to discuss how we could help them. Evidently the company was already in turmoil.

Estate Planning is for the Living

Although Sarah’s family has experienced more tragedy than most in a short period of time, death or disability of a mid-life or aging business owner is not uncommon. This often results in failure of the business. In fact, 47.7% of family owned businesses collapse at the founder’s death due to estate illiquidity, leaving the family and employees to deal with both the emotional turmoil and the economic realities. In this case, two of the decedents, and possibly all three, had no estate planning documents that could have reduced the estate tax due. Also, an operating agreement for the company would have spelled out how the company would be run, whether or not it was to be sold.

In cases like this, the company often must be sold to raise the funds to pay the estate tax due at the owner’s death. That might have been the case upon the death of Sarah’s dad. With sufficient estate liquidity, usually in the form of life insurance, she and her sister would have inherited the business and the subsequent proceeds from the sale if it were sold. At Sarah’s passing, estate tax would be due on her assets, including any interest she has in the business. Since there was no estate planning for Sarah or her dad, and possibly her mother, the only person or entity that will benefit from this unfortunate situation is Uncle Sam. Sarah’s son, Tom, will likely witness a serious erosion of his inheritance through estate and possibly income tax, court costs, and legal fees. In addition, he might be out of a job, even if his late mother has an interest in the business that is purchased by her sister and her husband.

This Won’t Happen To Me

You might be thinking, “I’m healthy. I don’t need estate planning.” My response is, “You’re right. You don’t need estate planning. But it isn’t for you. It’s for the people you care about ”. I can think of no better way to show your family and your employees that you love and appreciate them than to prepare now to insure that peace will prevail after you are unavailable to run your business.

10 Steps You Can Take Now to Insure a Legacy of Peace

  1. Make an honest assessment of your contribution to strained family and business relationships. Vow to change your behavior, make amends, and take the necessary, sometimes painful, steps to heal yourself and others.
  2. Bring in a qualified, trained, family business counselor to help resolve family / shareholder disputes.
  3. Execute estate planning documents, both personal and business. Have your financial advisor prepare financial pro-formas to demonstrate the financial results of your plan, or lack of a plan.
  4. Share your plan with your loved ones and key people.
  5. Develop an operating plan and update it as needed.
  6. Test your plan. Take time off to see if the business runs smoothly without you.
  7. Insure that all aspects of the business are in peak condition at all times.
  8. Obtain a business valuation from a credentialed valuation professional.
  9. Select your professional advisors very carefully.
  10. Convene periodic meetings with mandatory participation by all advisors.

Peace Begins Right Here, Right Now

Today would be a good time to take the necessary steps to insure that you leave a legacy of peace. Meet with your trusted advisors to start the process and then follow through by properly executing the necessary documents. If you wish to reserve the right to make changes in the future, your estate planning attorney can advise you about your options. If strained family relationships are the cause of your procrastination, start by retaining a family business councilor who can help you, your loved ones, and key people resolve issues that stand in the way of executing a plan. Then move forward with drafting and signing the necessary documents that will insure a legacy of peace for your family and valued employees.


Joan M. Ridley is president of Business Wealth Solutions, a Dallas-based advisory firm that consults with business owners about how to successfully grow and leave their business. Visit our website at www.bwsllc.net. Call us today at 214.692.9192 for a complimentary meeting to learn how we can help you get where you want to go.

Copyright 2007 Joan M. Ridley

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