Steps to take before things get out of hand

A number of years ago, a study found that the two most common causes of failures to successfully hand off a family-business to successors were unprepared heirs and poor communication among family members.

Even families who do not own an operating business often face succession failures.  In fact, any beneficiaries who face new business and financial responsibilities can find themselves at sea.  This is especially true when a parent suddenly dies or becomes incapacitated through a health event or accident.

Of course, many families with wealth or assets successfully navigate such situations, as difficult and painful as they can be.  Those families typically have reservoirs of goodwill, harmonious relationships, and a shared vision of how the wealth or assets should be used or distributed or how the business should be disposed of or managed.

Most commonly, unexpected infirmity or death will initiate the need for sudden succession.  But so can unanticipated marriage, divorce, adoption, or a family member’s disenfranchisement, addiction, arrest, imprisonment, or reappearance.

For some families of wealth, the coronavirus pandemic and its economic fallout can generate flashpoints such as these, and others.

Of course, specific circumstances require specific responses.  However, the following general guidelines can help a family with assets to regain their footing when they feel their world may be spinning out of control:

  • Keep calm and carry on
  • Establish goodwill
  • Understand who has the legal power to do what
  • Choose your attorney carefully
  • Avoid taking family members to court
  • Accept reality and move on
  • Get help if you need it

Keep calm and carry on

During World War II the British adopted the slogan “Keep calm and carry on’” and it’s a great starting point when facing any challenging situation.  While it is easier said than done, it is usually possible if family members first acknowledge their feelings of loss, fear, anger, or disappointment and then go from there.

In other words, this isn’t denial.  Denial or, for that matter going to pieces, will generally prompt family members to fall into their familiar roles—the alpha, the victim, the caregiver, the drama king or queen, the bad boy or girl, the whatever—and reenact old family dramas.

Those dramas will generally not promote practical problem solving.

Give yourself and others room to grieve and to respond in their own ways, but work to understand and share what’s really going on.  Ask yourselves:

  • What has happened at the action level?
  • What are the most likely realistic repercussions?
  • What can and can’t we do about this?
  • What happens if we do nothing for now?
  • What is the best path forward?
  • Who can we turn to for advice and assistance?

Establish goodwill

Reacting to family members based upon your calcified negative images of them won’t be helpful.  It may not even be fair, because most of us do somehow manage to grow up.

To establish goodwill practice good listening skills, especially if you’re not a good listener.  Let people talk without telling them why they are wrong, why you know best, or how everything is going to be all right.  Work to see things from their point of view, because to them that point of view is totally accurate and justified.

It’s okay and even beneficial to—in a calm and friendly manner—acknowledge differences of opinion and even disagreements over facts.  But it’s essential to agree that the overall good of the family and the family’s assets or business should be the chief concern.  All stakeholders in the assets or business should be reassured that their interests will be safeguarded.

Without that assurance, how can goodwill prevail?

Understand who has the legal power to do what

If there is a will—or even if there isn’t—the family must quickly establish who has the legal power to make decisions concerning the assets or the business.  The family will need legal guidance on this.  As trust and estate attorney John Ambrecht states, “Family members must understand that it’s not open season.  People have certain rights and responsibilities, as dictated by the will or trust, other documents such as corporate bylaws, and the law itself.”

Discussions about what Dad or Mom would have wanted have little weight compared with what the legal documents and the law say.

Choose your attorney carefully

If the family has an attorney who all family members feel comfortable with, wonderful.  If not, find one who will be sensitive to all family members’ concerns.  Many lawyers lack that sensitivity, while others are prone to take an adversarial approach from the start.  Such attorneys will, as a professional duty, represent whoever hires and pays them.

The family may need to take special steps to ensure that the attorney represents the entire family, if that is what the family wants.  Otherwise, the rules of client representation will likely call for the attorney to obtain a waiver to permit him or her to identify the entire family as the client. [i]

Be aware that, given our adversarial legal system (which confers many benefits) many attorneys naturally take an adversarial approach to business situations and client representation.  If you want to establish an atmosphere of collaboration and joint decision making, consider avoiding that kind of attorney.

Avoid taking family members to court

Few people want to sue their own family members.  It costs money, depletes assets, destroys relationships, and creates uncertainty.  Yet a family member may want to push others’ buttons, if only by threatening to lawyer up.  Or they may feel they have no other recourse except going to court.  Or they may believe that going to court will get them what they want.

On that last count, they are often wrong.  Courts are notoriously fickle in interpreting language in wills and trusts.  Some even knowingly override a testator’s wishes in order to establish “equity” among affected parties.  The unpredictable nature of court proceedings—civil or criminal—and their outcomes is why most people try to avoid going to trial in the first place.

Use extreme caution in this area.  I am not saying you should do anything to stay out of court or that you should never threaten legal action or give in to threats of legal action.  I am saying it is usually best to exhaust all other options—particularly mediation or arbitration—before taking legal action against a family member.

Accept reality and move on

The awful truth is that some parents neglect their estate planning responsibilities, keep their plans secret, or create conflicts through their wills or trusts.  Many simply leave their children and other heirs unprepared.  Some seek revenge on a child who they feel betrayed them or favor one who they see as disadvantaged or spurned by other family members.

Whatever their reasons and whatever the terms of their last testament, sooner or later you will have to accept those terms.  This is not easy, but it is necessary for your own well-being.

Like all of us, our parents are flawed.  They will hurt us through their favoritism, failures, and faults.  To me, a clear marker of maturity emerges when a person, suddenly or over time, with or without support, accepts that their parents were neither totally saintly nor irredeemably evil.

With that maturity comes the freedom of knowing that your parents do not have the right or even the ability to define you.

That kind of acceptance takes work, but it is work well worth undertaking.

Get help if you need it

Many families who would benefit from grief counseling, family counseling, or other forms of support in situations of sudden succession do not seek it because they don’t know where to turn.  Others don’t see it as something they need or simply believe “we just don’t do that sort of thing.”

That’s too bad, because those services exist for a reason.  Today, decades after my brother’s sudden death in a motorcycle accident, my siblings and I agree that our family would have benefited from grief counseling.  (Then again, there wasn’t much of it around in the early 1970s.)

I urge you to access the services you and your family need in these situations, which tend to be painful.  They are painful because the family feels vulnerable and has experienced a genuine loss, and because in those situations people will tend to fall back into their familiar family roles.

When those roles and the resulting interactions are positive, that’s great.  But when they are not it will take goodwill, knowledge, and support to navigate the situation.

You and your family can weather these situations, as so many others have, as long as you take care of one another and put the good of the entire family—and each individual family member—first.

On that basis, you will be able to make the best decisions regarding the assets, within the bounds of the law and the testator’s wishes as expressed in his or her will and other documents.

[i] Attorneys and others interested in alternative representation models should consult John Ambrecht’s writing on the subject in Business Succession Planning: Strategies for California Estate Planners and business Attorneys, California Continuing Education of the Bar (CEB); Chapter 2, “Ethical Considerations,” and Chapter 4, “Managing the Family Dynamic During Planning.”  This includes his discussion of the Zandor waiver, which enables an attorney to represent the family rather than an individual.