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Original poster

fair division of family assets

102 replies

YorkieBarn · 09/03/2022 20:35

Hello

I’m looking for some unbiased thoughts about what would be a fair division of a family business/ property.
My DH is one of 3 brothers who all worked in the family business as children/young adults.
One brother then took over running the business when their parents retired. It was always successful and is now even more so, there are
some stresses associated with the business but also lots of perks. DH and the other brother have worked hard in their jobs and no one is financially hard up, the brother running the business is now extremely well off.
In the past DH and brother have been partly bought out and there are now negotiations about about finalising the splitting of the business. At present DH and brother have both been paid out about 5% of the current value of the business.
Obviously everyone involved has their own views about this. Brother with the business says he works hard and deserves all/most of it. The others think this is unfair as they would have expected at least a 1/3rd share of the value of the business when parents retired with some adjustments for inflation etc.
Any thoughts...........?

OP posts:

Quartz2208 · 11/03/2022 18:21

They don't appear to have had any say in what they were given at the time, or any chance to have an opinion.

But why should they though? Inheritance though normally fair it doesnt have to be.

Your FIL has made all the decisions - he seems to have based in on what suited him (and his 15% dividends) and the business.

SeasonFinale · 11/03/2022 21:10

Your FIL owns 15%. The FIL should therefore give 5% to the son who owns 85%. That son should buy FIL out if he can for the remaining 10% so that FIL can give 5% to each of the other sons.

The son that runs the business has done so successfully enough for FIL to have a decent dividend to live a nice lifestyle. Your DH has done nothing to contribute to that and indeed took a share earlier to enhance his life then.

There was a really good TV show a while back on BBC2 called You Can't Take it With You which dealt with these types of scenario.

The way you keep coming back to argue on DH'S behalf makes me suspect it may actually be you that has the issue.

TizerorFizz · 12/03/2022 00:31

@SeasonFinale
I think Gerry Robinson did a series of programmes on family businesses and how to take them forward when there are several DC. I do remember the farming one where the sons working on the farm wanted their sister to have nothing. They would have all the property snd the land. She worked elsewhere.,The family found a way to give her shares and ensure she was part of the partnership. They saw a specialist lawyer who gave advice and drew up wills and business agreements. Just because the DD didn’t work on the farm, she wasn’t excluded from any inheritance.

If compensation has been paid previously, the remaining 15% does need to be looked at but sometimes it’s best if one sibling runs a family firm. Fewer distractions and differences of opinion.

TizerorFizz · 12/03/2022 00:36

@ancientgran
Yes. A well run family business with more than one DC really should discuss with all of them how they are going to proceed in the future. Making decisions without consulting leads to all sorts of issues. Only @Pythonesque seems to understand this. However the views of people on the thread clearly shows why there are often difficulties with family businesses! Always consult!

Rainbowqueeen · 12/03/2022 00:42

I would have the decision made by professionals. So a lawyer, an accountant and an actuary.

Give them the financial records and get them to value the business as at the various relevant dates. Use independents not the accountant etc currently employed by the business.

SeasonFinale · 12/03/2022 09:28

The reality is the FIL is not even dead.

@TizerorFizz that episode you mention re the farm was resolved by way of the daughter of the farmer inheriting a separate property owned by the family. Although she still wanted her own kids to be able to work at the farm if they wanted to. However she agreed to forego that when she was basically told she would not have access to capital.

In the OP's situation the FIL provided an amount of capital earlier on to compensate the non shareholding, non contributing DC.

TizerorFizz · 12/03/2022 13:16

@SeasonFinale
At least the whole family discussed her position and that’s what I was getting at. It can be that a very early decision on compensation isn’t always the best route either. Younger people have not always formed their career goals and are not encouraged to take an scribe role in the business. They can be cast adrift with insufficient compendium. I would say a whole house was better than a bit of a house.

SeasonFinale · 12/03/2022 14:53

In MN parlance they were adults who made a choice at the time. If now with hindsight they think they made the wrong one so be it. If the business/farm or whatever the OP is referring to was struggling and FIL wasn't get a decent dividend to live off would the two that took their capital at that stage be giving it back to Dad or propping up the business. My guess would be no.

TizerorFizz · 12/03/2022 15:16

Farms always have a capital Camus though. This can be substantial. It’s not just about annual profit with a farm. Other businesses might have substantial capital holdings too., it’s all too easy for younger people not to realise what might be there later so any agreement can revisit the compensation. It’s like a football player that’s purchased. The purge den go up if they play for England. You write clauses in that benchmark compensation against future success. No more is given if there isn’t success. It’s really unimaginative to say here’s £20,000, that’s your lot, and one brother gets £4m.

ancientgran · 12/03/2022 15:35

[quote TizerorFizz]@ancientgran
Yes. A well run family business with more than one DC really should discuss with all of them how they are going to proceed in the future. Making decisions without consulting leads to all sorts of issues. Only @Pythonesque seems to understand this. However the views of people on the thread clearly shows why there are often difficulties with family businesses! Always consult![/quote]
It was the FIL's business and he can do whatever the hell he likes with it. different if 3 brothers started a business together then 2 went off to do their own thing and left one to run it, then they need to discuss it but if one person starts a business it is his business.

ancientgran · 12/03/2022 15:37

@Rainbowqueeen

I would have the decision made by professionals. So a lawyer, an accountant and an actuary. Give them the financial records and get them to value the business as at the various relevant dates. Use independents not the accountant etc currently employed by the business.

So if I invested years of my life starting a business and building it up and then one of my children built it up even more I would have some sort of obligation to let strangers come in and decide what happens to it? In your dreams.

rwalker · 12/03/2022 15:38

So BIL already owns85% and FIL has 15%
FIL wants to sell his share 15% goes between the 3 brothers 2 in money and other 5% to the one who own most of it .

Looking at it differently if the business was in trouble would DH be offering to pump money in
Think you DH should get 5% of current value

Itsbackagain · 12/03/2022 15:46

Your DH has had money and cars and didn't want to work in the business. He isn't entitled to any of it imo..BIL has built up the business..

TizerorFizz · 12/03/2022 15:57

@ancientgran
You are being completely ridiculous. Other professionals give advice. Family business are difficult territory. It’s not now a business owned by one person. By including a son, it is, by definition, a family business. Money has been paid to the other sons. Presumably they had no professional advice at all. How do you know the settlement was fair or arrived at in a fair way? It’s also a huge recipe for a family fall out. Involving everyone, taking professional advice and ensuring future financial clauses can be invoked are all part of this. Then it’s not winner take all and the others feeling screwed.

Ginger1982 · 12/03/2022 16:08

I think your DH should get something but not 1/3 of a business he's effectively contributed nothing to. Presumably your BIL has made it the success it is. Why should he then have to share that equally? Do your in-laws have any other assets?

ancientgran · 12/03/2022 17:01

[quote TizerorFizz]@ancientgran
You are being completely ridiculous. Other professionals give advice. Family business are difficult territory. It’s not now a business owned by one person. By including a son, it is, by definition, a family business. Money has been paid to the other sons. Presumably they had no professional advice at all. How do you know the settlement was fair or arrived at in a fair way? It’s also a huge recipe for a family fall out. Involving everyone, taking professional advice and ensuring future financial clauses can be invoked are all part of this. Then it’s not winner take all and the others feeling screwed.[/quote]
If you read the post I was quoting they weren't talking about advice, the said, I would have the decision made by professionals. How often do you let professionals decide what to do with your money? Going Christmas shopping, are you allowed to decide how much you want to spend on people or do you let the professions decide?

Who says it has to be fair, the father created and built the business. It was up to him how much he gave his sons, professionals might have an opinion but it was his business and his decision.

I think it is completely ridiculous to allow other people, your kids or professionals, to dictate what is "fair" with your own money.

Fortunately my kids all speak as one, "Spend your money and enjoy it." They will get an inheritance but they wouldn't dream of dictating what it should be.

user1493494961 · 12/03/2022 17:10

DH is being very greedy, he doesn't deserve any extra.

TizerorFizz · 12/03/2022 18:38

@ancientgran
All the time. We have a large investment portfolio snd DH owns a company. We don’t have the expertise for dealing with £millions. Do you?

CraftyGin · 12/03/2022 18:45

Your PILs need to make it clear in their wills. The brothers could meet with them to thrash it out.

They could also disperse some funds to the brothers before they die.

My instinct is that it should be split evenly, without a nod to the brother who manages the business. Presumably, he has already had a salary for his work?

DespairingHomeowner · 12/03/2022 18:59

NRTFT : just from VERY bitter experience, get this sorted while FIL is still alive or this family will implode

Isn’t it up to FIL to decide? I tend to agree 1/3 split of a past value (when FIL gave up the business OR when the brothers were actually involved) and the gain is more with the brother who made the money grow since… but can also see the other side (gain is dependent on capital)

So this needs sorting as they would not be first brothers to irrevocably fall out over the family business

PegasusReturns · 12/03/2022 19:02

Based on fairness I’d say you need to know what the business was worth when FIL retired and the value that DH was given in “buy outs”.

e.g. business was worth 1million when FIL retired. He retained 15% (150k) 850 should then have been split three ways (283k).

The 15% should then be split 3 ways on death of FIL based on current value. E.g. if business is now worth 2m then 15% is 300k so each brother gets 100k.

If your DH got less in buy outs than the 1/3 - 15% at transfer then I can see why he might be upset. Did he not?

TizerorFizz · 12/03/2022 19:17

It’s often the case that the brother working the Company gets 51%. They shouldn’t be lit voted by non working directors/ partners. So my view would have been to split 36% (51% to brother in company, 36% to siblings, 15% to dad. Dad then decides an extra 5% each in his will.

The other elephant in the room is who might be employed in the future. What happens if DC of brother are not interested but DC of OP are? There should be agreement on how employment will be looked at in the future. Are the OPs DC never to have a chance of employment?

ancientgran · 12/03/2022 19:37

[quote TizerorFizz]@ancientgran
All the time. We have a large investment portfolio snd DH owns a company. We don’t have the expertise for dealing with £millions. Do you?[/quote]
I take advice but other people don't make the decisions about giving my money away. Would you seriously be OK with someone deciding who to give your husband's company to and how much he needs to compensate other people for not giving it to them? Seriously take advice but don't let other people give your money away. That is madness.

ancientgran · 12/03/2022 19:41

@PegasusReturns

Based on fairness I’d say you need to know what the business was worth when FIL retired and the value that DH was given in “buy outs”.

e.g. business was worth 1million when FIL retired. He retained 15% (150k) 850 should then have been split three ways (283k).

The 15% should then be split 3 ways on death of FIL based on current value. E.g. if business is now worth 2m then 15% is 300k so each brother gets 100k.

If your DH got less in buy outs than the 1/3 - 15% at transfer then I can see why he might be upset. Did he not?

Where does the "should" come from? Don't you think people should have autonomy about their own money? We don't have any information about why the father made the decisions he made about his own business but at the end of the day there isn't a "should" no one has a right to an inheritance when your dead but this poor man is still alive and the vultures are circling.

Turningpurple · 12/03/2022 19:55

He is actually very generous and did offer to remortgage our house should the business run into problems due to Covid

I could offer to remortgage my house for the company I work for. Its not actually generous unless you do it.

If the brother owns 85% surely, then your dh is only entitled to 1/3 of what the father actually owns. So 5%.

Your dh already benefitted from gifts from his father, before.

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