Some Illinois business owners have a family member involved in the business and imagine that one day their relative, possibly a son or daughter, will take over the business upon their passing. Naming a family member as an heir to your business ownership can be accomplished with estate planning, but doing so could create some conflict among your family if you are not careful.
FitSmallBusiness explains that discord among family members will likely depend on the makeup of the family. If you have just one child and your child is involved in the business, naming your child is unlikely to produce problems because there are no siblings to be jealous of your child’s position. However, there could still be problems if you have nieces and nephews who are part of the business and maybe eyeing a promotion or even ownership of the company.
Picking a family member to be an heir takes some care. The relative should be actively involved and interested in the business, and should also be competent and make good decisions. In the event multiple relatives express interest in ownership, some business owners divide up the ownership among their family members. This can work, but only if the relatives can share the ownership in harmony.
In other cases, a business owner may opt to split up the duties of the business among the family members. A niece may take over sales, a nephew may work on developing products, to name some examples. This can be effective, provided that all duties are spelled out clearly, that each heir is named specifically to take over a specific duty, and that compensation for all heirs is described in clear terms.
There can be multiple problems with splitting up ownership. A company, to run effectively, generally needs a single decision-maker, although bigger companies may have more complex leadership structures. You may need to consider putting in buy-sell agreements in your estate plans so that some of your relatives can be bought out, particularly relatives who may wish to move on from the company after your passing.
If possible, you should discuss these issues with your heirs. If they feel frozen out of the decision-making process, they may become offended and could challenge your estate plans in court after your passing. You might be able to convince a family member to take a generous payout and leave the company to your preferred heir. You could also ask an experienced estate attorney for assistance in composing your succession plans.
This article is written to educate Illinois residents on estate planning matters and is not to be taken as legal advice.