Monday, July 29, 2013


There is an old adage in the retail business that the three most important points in your business plan are; location, location and location.  Meaning that no matter how good the rest of your business plan is, if you do not have the customer traffic, you will not succeed. 

I was recently reminded in an unpleasant way that the three most important management techniques in being a personal representative, trustee, or manager in a family estate, trust or business are; information, information and information.  It has been my experience that about 80% of all family disputes about the running of, and distributions from family estates, trusts and businesses could have been avoided if the person in charge had just communicated more often and in more detail with the other concerned parties.  Most arguments and dissatisfaction within these family enterprises arise from differing expectations or understandings of the facts. 

For example, one heir of an estate may think that their parents left an estate of $1 mil when there really is only $700,000.  An accurate inventory of the estate assets with supporting documents would have cleared this up before any mistaken expectations could cause bad feelings.  Or one beneficiary may believe that all the assets of the trust were to be divided equally among the beneficiaries when in fact the trust calls for an unequal distribution.  Or one member of the family may think that the family business earns $200,000 per year, when in fact it only earns $50,000 and needs to retain that amount to expand the business inventory.  All of these disputes could have been avoided by simply communicating information to all parties.

Sometimes the person in charge believes that they are doing the right things and that is all that is required.  But whenever there is a vacuum of information, others will fill the vacuum with their own inaccurate guesses.  Other times the manager believes that they are too busy to do interim reports, they will send out a report when the estate or trust is finally settled.  But by then, people have already formed their opinions.  The information needs to be communicated as it is being developed, before others start to form their own guesses as to what the results should be.  Much time and frustration caused by unhappy family members could be saved if the person in charge keeps everyone up to date as to what is happening and what decisions are being considered.  If the proposed decisions cause disagreement, the disagreement can usually be resolved with much less time and stress if it is fully discussed before any action is taken rather than after.  After an action is taken the decision maker is often on the defensive when justifying what they have done, but before an action is taken it is easier to listen to conflicting ideas without getting upset.

So if you are the one in charge of a family enterprise, whether estate, trust or business, take the time to send out complete and frequent reports on what is happening.  And if you are one of the interested parties but not the one in charge, before getting upset, ask the manager for complete and frequent reports.  Everyone will be much happier with both the results of the enterprise and with their family members if you remember: information, information and information.

Loren McCann, CPA, MS (Tax)

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