In my last article, I addressed the question “Where Do I Start?” and I introduced the Three-Circle Model of Family Enterprises that is now commonly used by Advisors. In this article we will look at the Family Circle and some of the issues that arise and some suggestions for how to approach those issues.
When I work with a Business Family, I like to start by preparing a Genogram (Family Tree) as the first step in nudging them towards a little bit more formality than what they currently have. In some cases we will colour code the Genogram to identify those family members who are currently shareholders of the Family Business, those that are currently working in the Family Business, and perhaps those interested in either working in the Family Business or someday becoming an owner. The Genogram will also be used to identify where there are marital problems or other strained relationships or areas of conflict, and any other information deemed useful.
We next take inventory of the basic documents and whether or not they are up to date. A basic list and some of the related issues is included here:
- a. Dual Wills to deal with Ontario Probate Fees?
- b. In place for all Family Members & especially those who are owners of the Family Business?
- c. Do the Wills deal with the estate distribution in a way that is still appropriate?
- d. Are the Executors still appropriate?
2. Powers Of Attorney
- a. In place for financial matters?
- b. In place for health matters?
- a. Are Family Trusts currently in place?
- b. If not in place, to be considered?
- c. Are Testamentary Trusts created under the Wills?
4. Shareholders Agreements in place?
Once the inventory of documents has been taken, we would suggest that the family / business lawyer be brought into the discussion to provide input and updating of documents as required.
The preparation of a Personal Financial Plan – at least for the senior family members who are shareholders - should be considered to assist these family members with their personal goals and putting timelines to those goals.
The formality introduced by the above has helped with the Family side of the process of assessing the strengths and weaknesses of the Family Enterprise. In future articles I will look at working with families to assess the reasons for possibly selling the business and we’ll look at Governance In The Family System for those families that are ready to move a little deeper into formalizing their Family Business.
Our firm works with many family businesses on succession issues. Please let us know if our Business Transition & Family Enterprise Advisory Services team can help you.
Article by: Paul G. Stringer, CPA, CA, FEA, Partner
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