Not too long ago a client asked, after our initial review of the family succession planning environment, where his family stood on the weirdness scale. Well, weirdness is not really the issue, but optimization of human functioning and relationships is of paramount importance. The reason I tell clients that we pry into family dynamics is precisely because family issues compel business decisions. Little did I know 8 years ago when I entered succession planning for family owned businesses as a career how helpful my background as a professional counselor would be. In my next three posts I’ll describe several scenarios and the impact on the business planning environment.

About a year ago I was called in to work with a 4th generation family business in which the father was preparing to transfer stock to his three children. In the interview process I heard some interesting things from one of the children that concerned me, namely some delusional type thinking. The problem was that this child was eccentric in some ways and otherwise appeared to be functioning at a relatively healthy level. The general consensus was that he was just weird.  After recommending a complete psychological evaluation, the family learned that he was not weird, but suffering from a very serious mental health issue that he will struggle with for the rest of his life.

To transfer stock to this child could have potentially created a very destructive land mine in the succession plan. Not only would the other siblings have to deal with him as a partner, as well as the managers and employees as a potential “boss,” but the risk of business ownership would not have been fair or appropriate for the afflicted child.  With a psychiatric illness, this child is in no position to manage millions in business related assets. The stock transfer would have been outright to the child. Further, the estate plan also had assets going outright to this child. 

Knowing what we were dealing with allowed us to make decisions in setting up a plan that was a win-win scenario for everyone involved.  Assets other than business related assets were transferred to this child and trusts were established for appropriate asset management during his lifetime.  Further, he is stabilized on medications and has had no further delusional thoughts. He is currently functioning well. Obviously, getting to this point with the family required some very straightforward, honest, open, and direct communication. The family and the business are better off for it. 

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