I want to tell you a story about a family business, a tragic loss and the three sons left to deal with the aftermath.
It was a classic American family, husband and wife working together to make the most of their hard-earned success.
The youngest son wanted to one day follow in his parents’ footsteps. He wanted to see the family business keep growing long after his parents retired, and he had the mind for it.
The other two sons were far more interested in the cash the business generated than running it for the long-term. Although the parents knew the youngest son should be in charge, in putting together their wills, they decided the fair thing to do was to give each son an equal interest and an equal amount of power.
The parents were killed in a car accident shortly after.
In 18 months – with a lot of 2-1 votes making poor, short-term decisions – the two older brothers drove a once-thriving company into bankruptcy. It could have all gone differently.
Cases like these are very common to our Advanced Solutions team at The Principal®. We work on dozens of transition plans for family businesses every year.
Leaving a business that has been your life for decades can be very challenging and can be even more difficult when children are involved, but expert help is available to ensure your family is taken care of and your business has every opportunity to continue on after you’re gone.
This case came to mind recently helping coach an 8th grade basketball team. This team plays in competitive tournaments. After our last game for the weekend, the parents of one of the players came up to the head coach and said their son wouldn’t be playing anymore since we aren’t giving everyone equal playing time.
There are certainly times when equal playing time makes sense, but it was clear from the beginning that this was a competitive team, and we were going to try to win games. With that goal in mind, playing time wouldn’t always be equal.
In looking at this situation, it is pretty clear that what seems fair to one may not seem fair to the others on the team. Almost all the coaches I know would like to play all the players that work hard equally. Unfortunately, players have different skill sets. Supporting those that are on the floor when you aren’t is an important part of being on a team.
We all have strengths and weaknesses, whether it is athletics, education or running a business. We oftentimes like to believe the best solution is the easy solution of “playing everyone equally”, or in the story I started with at the top, divvying up the family business equally among the sons.
So about them… What could they have done differently?
Had the parents put the younger son in charge and equalized the estate with other assets, or with life insurance, I believe all three boys and their families would have been in a better spot.
The bottom line, when it comes to playing time, or transferring a business interest, equal doesn’t necessarily lead to accomplishing the overall goal.
Insurance issued by Principal National Life Insurance Co. (except in NY) and Principal Life Insurance Co., members of the Principal Financial Group®, Des Moines, IA 50392.