How to Avoid Resentment in Family Asset Transfers
Many Baby Boomers are thinking about their legacy, and part of that process is positioning their material assets—businesses, cabins, money—for transfer.
What may seem straightforward and impersonal on paper, however, is almost always something else entirely in reality. These assets are being transferred from and to human beings, and the fact is, humans are emotional and messy. Our odds of making a painless transfer are low unless we come to grips with the human side of the transaction.
Last week I had dinner with a client whose family business is experiencing explosive growth. He is 52 years old, his mother runs the company as majority owner, and three of his other siblings work in the business with him. One of his brothers, who is 14 years younger than him, is the president and chief operating officer…and his boss. His sister—and youngest sibling—will eventually become majority owner as they are committed to remaining a woman-owned business. She jokes with her older brothers that one day she will “leap-frog” over them in power.
All of the family members claim they are without any resentment or bitterness. As he said at dinner, “We all know and accept our roles.”
How does that happen?
This is a subject that hits close to home for me. As a third generation business owner, this is a topic I’m often asked about. And I’ve noticed four critical factors for a successful transition and transfer. The first is intentional and early planning and communication with the help of legal and financial experts. The other three are:
1. Accept that “fair” does not mean “equal.” It’s nearly impossible to quantify tangible and intangible gifts over the lifetime of a family. And each person sees the world from one perspective. Equal treatment among people is impossible and shouldn’t be the assumed objective. It’s much better to pursue fairness, which means avoiding unjust advantage. And only the ones transferring the ownership have earned the right to determine unjust advantage.
2. Recall the higher calling. It’s up to each generation to decide whether to pursue the lower goal of selfish gain or the higher goal of creating sustainable value. To set the stage for more altruistic outcomes, consistently frame discussions in the context of what’s best for “the customer,” “the employees,” “the property” or “the good of the family.” The leader described above told me his late father continually emphasized that the customer came first over family selfish interests.
3. Check your ego. Consider the source of your identity. Are you what you have? Are you what you do? If so, it will be very difficult to share and let go. My dad ran our company and had gained universal respect and admiration. The majority of his waking hours were invested in our business. He had all of the justification to hang on. But he gracefully let go and let others absorb his capital. He has a lesson for those on their way out and those on their way in: Be aware of where the team needs you, and be content to take that role.
What asset transfers will require you to be intentional? Please comment on other keys to effective generational transfers. Our families depend on it.
Also, please comment or reply with other topics you’d find interesting in future posts!
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