Estate Of Affairs

Equal Treatment

Philosophically, families believe that the way you show children you love them equally is to treat them equally. But "equal" rarely means fair. A father might set up a basketball hoop in the driveway as a present to his daughter the athlete, but giving the same gift to his daughter the musician would hardly be fair. Many business advisors say the same applies to company stock.

"The father of one family business decided to leave the stock in the company to his son, who was in the business, and an equivalent amount of [other] assets to his daughter," Swartz recounts. "She was hurt, thinking her father didn't care enough to give her stock in the company or to consider that her brother might be getting more because the value of the business was bound to increase. Her father explained that this was not a question of who was the better loved. But if the brother helped to increase the value of the business, he would be entitled to the profit--just as the daughter would be entitled to the profit of mutual funds she inherited if they increased in value when she sold them."

"Parents shouldn't abdicate estate planning decisions to children," says Geller. "But as long as children are old enough to have some involvement, it is important to find out what they want." Do they feel ownership in the company is part of their birthright? Do they care about control? Do they want to be in company management one day, or are they uninterested in the business?

"Too often parents talk only to each other about what's fair for the children and don't hear what [the children] have to say," says Swartz.

Once the plan has been developed, share it with those who will be affected by it. Says Swartz, "An estate plan is not complete unless the next generation knows about it."

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This article was originally published in the April 1997 print edition of Entrepreneur with the headline: Estate Of Affairs.

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