Another situation I dealt with recently during an annual review of planning involved what I refer to as a “five minute bomb.” Five minutes before the end of the meeting with a client, when I’m preparing to leave and go home, he says to me “oh, there’s something else I forgot to tell you” and it is inevitably an intense subject that requires much more than five minutes to handle.
In this particular case, the business owner has three sons, two of whom have been involved in the family business since a couple of years after they graduated college – about 15 years now. The third son worked in the business early on, but got sideways with one of his brothers and decided to pursue a different career. All of this had been successfully worked through several years ago with family relationships successfully restored and the third son finding success in a new industry. All was well.
Well, in the economic downturn, the third son ended up losing his job and was out of work and looking for a new position. As most dad’s who care about their kids would do, he wanted to offer this son the opportunity to return to the family’s business. However, being sensitive to the relationship issues that had occurred previously, the father was hesitant to do so without a lot of guidance.
The good news is that we were able to meet with the brothers and achieve alignment, with all three of them being able to put the past behind them, and bring the third son into the business. We defined his role and clearly communicated expectations. He’s been doing well and performing to expectations. Consequently, now that all three of the sons are active in the business, dad appears to be having a change of heart with regard to how stock in the business should be allocated between them.
Looks like it’s time for some more work to be done: revising covenant agreements, updating shareholder agreements, recapitalizing the business into voting and non-voting stock, creating appropriate buy-out provisions, calls and puts, etc., etc. Reviewing your plan regularly will help you stay on top of these changes in family circumstances and changes in your feelings.