In and Out of the Business: Gifting Fairly
I have three children. Two have joined me in the business. The other is a well-educated, disciplined, talented painter. I am equally proud of each and I want to treat them equally.
Recently, I gifted to each child in the business a 20% ownership position. Thanks to favorable valuations, the gift was attributed a fairly low value. My thought was to give my artist an equal amount in cash. But is that equal? Is it fair? Can you help me think through this dilemma?
You are comparing apples and oranges here. First, the discounted value assigned to your business childrenâ€™s share has little relation to the stockâ€™s real value. What youâ€™ve really done is to give your sons a fantastic start on their careers. Effectively, youâ€™ve put them in business and been their mentor. The value of your gift is simply and truly incalculable.
The value of your support, enthusiasm, and pride in your other childâ€™s artistic career is also incalculable. But helping your artist get his start on life and his career takes a different form than that of receiving stock in the family business. Perhaps your artist has basic professional needs, like a studio or supplies, that you could provide. Perhaps your business skills could help your son with procedures, plans, finance and marketing for his efforts to make his living through art. You must, however, provide support in a manner consistent with his goals. That means a lot of communication before decisions or actions.
When you talk with your son, explain what youâ€™ve done for your other children and your desire to help him get a â€œstartâ€ in his career. You might wish to set up a mechanism to provide him a minimal level of support--say $25,000 a year--so that he doesnâ€™t have to worry about basic needs while he pursues his calling. Then gift assets that would produce that income.
The equality here comes not from the value of the assets given to each child but from the function served by those assets. Youâ€™ve produced the means by which your children can pursue their chosen paths in life. Each child chose and validated his or her path. In ways responsive to their individual needs, talents and goals, you responsibly offered the means by which they could achieve their view of a good and meaningful life.
And in each case the â€œvalueâ€ of your gift is the same--incalculable.
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