This April on Gwinnett BusinessX Radio, partners Adam Gaslowitz and Craig Frankel participated in a lively discussion on estate dispute resolution and the issues surrounding fiduciary litigation.
Here are some highlights from this month’s show.
What is your number 1 tip to avoid estate disputes?
Craig Frankel: Talk to your beneficiaries. Talk to your partners. I tell anyone who is starting a partnership that it’s like a prenup. You have a contract. What happens if you have a dispute or a disagreement? The best time, when you’re going to be the most fair, the most honest, and the most understanding is when you start. So figure out a way to be prepared with a dispute resolution plan in advance, and when you have a dispute, you follow the rules.
How do dispute resolutions affect family businesses?
Adam Gaslowitz: There is often some family members who are working in the business and others who are not. And so, potential conflicts arise a lot, in the context of how do you transition a business from one generation to the next. A lot of estate planners who deal with family businesses contact us to say, “We know we’re going to have this problem. We know we’re going to have a problem when Generation 1 retires and parts of Generation 2 take over because the other parts of Generation 2 are going to feel slighted. They’re going to feel like their siblings are mismanaging the company, taking too much compensation out, or the stock distribution isn’t quite even.” A lot of times, the people who aren’t involved in the business, the other siblings, might end up with more stock than the one who is in the business, and it’s easy for the non-business operating siblings to vote out the other. So you have to work around that. You have to make a plan and figure out a way to ensure the business doesn’t implode as Generation 1 retires.
What are some of the other common disputes you come across?
Adam Gaslowitz: Probably one of the biggest areas of dispute involves the poor choice of a fiduciary. Either the wrong person that you’ve chosen as a trustee of your trust or the wrong executor of your estate. A lot of times, it’s the wrong choice, not because that person isn’t qualified, but because somehow that person is a lightening rod for conflict within the family. For example, if you name your eldest son to be the trustee of the trust, but he doesn’t get along with your new wife, you’re going to have problems.
Craig Frankel: And you’re going to see that a lot in what you colloquially call blended families. Fifty percent or more of all families will have a second marriage or children from a prior marriage. So, you would logically anticipate those kinds of problems, but it also happens in traditional families because the dynamics of each family are different.
The full broadcast can be downloaded on Gwinnet Business RadioX or viewed on the Gaslowitz Frakel YouTube Channel.
