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Dealing with Fairness in the Family - Part I


In succession planning, fairness in the treatment of family members may well be called the very powerful but mostly invisible force in the room, with the potential to cause much stress and anxiety. The cause resides in the typical desire of parents to treat their children equally, which is not necessarily the same thing as being fair. The concept of fairness in the family brings forward multiple streams of factors that should be considered in the succession planning process and decisions made, but because so much of it is so difficult to deal with, decisions are made to keep the peace.

It is common for the succession planning process to be halted somewhere due to resentments. This may occur during the implementation of final legal documentation or at any other stage of the process. The “well, I did not know,” “you never told me before” situations are difficult to deal with. If handled properly, with all facts brought to the table in a calm and controlled manner over an expanded timeline, discussions between the role players can be made in a civil way and resolution sought for real or perceived problems. This is completely different than dealing with an after-the-fact discussion that arises from negative feelings or perceptions that have been solidified, when adjustments are required by all affected parties. The longer it is delayed, the more likely positions have become entrenched.

This series will provide you with critically important information that can help you handle this situation.

Guidelines for dealing with fairness in families:

  • Please accept that as parents you most likely have the highest degree of control over the situation. Yes, this puts an incredible onus on you; however, the upside is that you are able to have a major say in what is decided.
  • Exercise this responsibility with the utmost of care as the children may have lingering tensions long after your exit.
  • Do not delay dealing with the difficult situations early in the process. As stated before, not dealing with the underlying tensions does not minimize the impact.
  • Do not leave the difficult decisions for your children to deal with, especially when they do not know that you are doing so. This may put unbearable strain on the children who have primary responsibility for handling business affairs. It may have detrimental implications for the business you are leaving behind if those carrying primary responsibility for leading the business have to focus their attention on navigating through family relations and having to make decisions that could and should have been dealt with by the generation passing on the business.
  • Accept that equality and fairness are not necessarily the same things. Equality may require all children to benefit equally from the estate. Fairness may require adjustments to such equality based on the personal situations of children (e.g. marriage break-down), or unequal roles played historically or presently in the management and leadership of the family business. Go through a thorough process, document your rationale for the decisions and when the time is right, be willing to have conversations with all the children, individually and combined.
  • When compiling your will, you know in the back of your mind that you may not have to deal with the implications of your decisions. But the moment the succession process starts and wills are updated, many of the thorny family issues may be accelerated into the here and now. Implications of decisions move from a distant future possibility into a present reality, bringing all the positive and negative emotions that may be attached. This makes it even more important to have your ExitSMART advisor help you work through a complete, holistic process to ensure that all the necessary pieces of the emotional, legal and financial puzzle are brought to light on a timely basis and within the context of a complete process.
  • Legal implications such as the B.C. Wills Variation Act may require you to get advice from a legal practitioner well versed in estate law and possibly also estate litigation.
  • You do not have the luxury of denial or the right not to have difficult conversations with the next generation. Even if you are uncomfortable dealing with conflict and are scared of the consequences, it remains extremely important to ensure that you communicate your decisions and rationale for such decisions, at the appropriate time.
  • Personal coaches can help the family deal with these situations. Do not shy away from making use of such a person.
  • Keep in mind the timelines and time dimensions of decisions. An example would be where one sibling receives control and the value of a company and you have the intent to equalize the other siblings through, for example, cash investments, the executor of your estate cashing in RRSPs or using life insurance to generate cash at death. Clearly stipulate in discussions with the succeeding generation what the values and timelines are.
  • There may be cases where conversations to discuss an imbalance of equity distribution may be just too difficult or the timing is not right to have them (for instance, some of the children may be too young or going through a marital breakdown). In these cases keep in mind that the sudden death of the founding generation may lead to major problems for the children who inherit the business should other siblings contest the will. This may have a disastrous impact on the business and future family relations.