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Motivating Stock Gifting

Dear Advisor:

Im having trouble convincing my parents to gift their stock in the family business to me and my siblings even though it benefits their estate planning. Your advice seems to be “gift early and often, but despite their being in their late 50s, I can’t get them to get moving. Any suggestions?


Transferring stock ownership from one generation to the next is an essential element of family business transition planning. Careful planning of the process can assure orderly hand-off of the legal control of the business and can help minimize cash out to the government for estate taxes. But let’s be clear, estate planning is for the beneficiaries of the process (hence their name), not those whose estate is planned. Estate planning is a process of stewardship, generosity and love. And the owner of the estate being planned has the legal right to dispose of assets as he or she sees fit--even if it means paying off a small piece of the federal debt.

Yes, we believe in gifting “early and often” -- but in reference to family business situations where family is committed to preserving ownership control in the family, leadership for the next generation is fairly clear, and financial security for the incumbent generation is assured.

Rather than pushing your parents to make gifts that will ultimately benefit you, focus on assuring conditions that will increase your parents’ comfort with giving.

Is there consensus on family values and goals as they relate to the business? We hear many parents say: “Why should I pass stock to the kids if they plan to cash out when they’re in control and then lead the high life?” The real issue relates to insecurities about shared goals and values.

Has the next generation demonstrated that it can effectively work and make decisions together? Members of the younger generation should work hard together to demonstrate to their parents their abilities to resolve conflict, agree on leadership, support each other, and build cordial relationships.

Has next generation leadership shown its competence, maturity, and commitment to the business and the family? Performance-tested next generation leaders, who seek and appreciate accountability, and who have shown their dedication to family goals and values are people to whom the older generation can confidently pass control of family assets.

 

Does the older generation have assured lifetime financial security regardless of what happens to the business? Since stock in the family business is often the older generation’s primary asset and means of financial security, they would be foolish to give it away. We find that providing for the older generation’s lifelong financial security is more important than is estate planning in triggering generational transfer of family business control.

Commitment to assuring that your parents’ needs and concerns are met will promote a very different perception of you than would be the case if you seem to be pushing for gifts of their valuable assets and ability to control their own destiny.

The ADVISOR

 

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