Twenty-five years ago this summer, I began work at Arthur Andersen & Co. as a member of the Chicago office tax division. As a participant of the estate, trust and gift tax planning group, I was fortunate to prepare the more complicated estate tax returns in the office, and perform research and writing for articles published on estate and trust matters. Since leaving Andersen to practice law in Naperville, I have continued to devote a portion of my practice to advising clients on estate tax planning and methods of preserving, protecting and passing on their assets.
For the first 15 years of my practice, I concentrated on business transactional work, including estate and succession planning. During the last 10 years, I changed the nature of my practice to concentrate on business litigation, doing the reverse of many who convert from litigation to transactional work. The change has provided me with additional insights and a broader understanding of the relationship between negotiations, agreements, wills and trusts, mediation, litigation and resolution in relation to family disputes. This article focuses on family business disputes, especially those relating to estate planning, and how "family matters."
Family disputes in business and estate matters are increasing for a variety of reasons, but chief among them is the demographics of the population. An older, financially independent generation will enjoy the benefits of modern medicines and modern conveniences as never before. They will also face challenges concerning their businesses and estates their ancestors seldom contemplated, because they died 15 to 25 years younger. Today, many members of the older generation celebrate their children’s retirements by being in attendance.
A common cliché often referenced in family business disputes is, "It’s not just about the money, it’s all about the money," cannot be entirely dismissed. Yet, the factor of "family" must be more carefully considered because, even if the members of the family behave in a manner other than how a family "should," attorneys, consultants, judges and juries often view a "family" business or estate dispute differently. Their views are skewed by concern for trying to establish "harmony" and projected beliefs that a family member "would not do such a thing" to another family member. Unfortunately, such prejudices and beliefs often serve the pecuniary interests of the wrongful perpetrator by enabling him or her to actually succeed in schemes a non-family individual would never attempt. In fact, should a non-family member make such an attempt, all prejudices are usually against him or her.
Another common feature of family disputes not regularly discussed in non-family disputes is the "morality" of the situation. Many believe families should never use the court system to resolve family disputes because of the overriding value of keeping all such matters within the family. Also, family members will frequently become fixated on what’s "right" in their opinion.
Coupling the unique features of family disputes with present day demographics may explain the continuing increase in family business and estate related litigation. Longer life expectancies mean immediate family relationships span a time period 20-plus years longer than that of prior generations. Today’s older generation will at least observe, if not participate in, their children’s lives to a much greater extent, for better or worse. Rather than die just as their children begin working, getting married, raising children and buying homes, they may well vicariously experience much more. As a result, each child’s circumstances at age 55 to 65 vary considerably more than when all children are between the ages of 25 and 35. Work, family, relationships, economics and other life experiences are more defined and varied. As once observed, "life is like writing on a chalkboard without an eraser." More has been written.
Also, the older generation parents do not exist in states of "status quo." They continue to have new experiences, especially in connection with the age-related effects on physical and mental capabilities. Not that they are necessarily incapacitated, but their decision making focuses more on whether they want to either "think that hard" or prefer the "simple" solution for convenience. Many times their plans are more and more driven by the desire for simplicity, and perhaps rightly so.
Whenever I am asked for a "simple will," I advise the client that a simple will is better described as the will to "run out of breath and money on the same day." Given some family business disputes, there are days on which the simple will approach appears inviting. Family business disputes are emotionally costly, whether pursued or not pursued in court.
One important aspect of the relationship between the older generation and their children is care taking. As the older generation becomes more dependent, decisions must be made as to how, where and under what circumstances the older generation will be cared for and by whom. Unfortunately, these decisions may have to be faced at the very time the younger generation, the children, are beginning the rediscover freedom from constant attention to their own children’s needs.
Should the family relationship also involve a family business in which one or more children are employed, there will be additional complications. Even without the "family" factors, the decisions to be made are difficult. Add them in, and emotions may take over. In some cases, there may be one or more of the children who sense an opportunity to take unfair advantage of their siblings and take it. If discovered, a dispute begins.
During the last 10 years I have represented in court son against father, father against son, mother against daughter, sister against sister, uncle against nephews, brother against sister-in-law, brother against brother and sister, and others in family relationships in family business and estate litigation. In virtually every instance, the downfall of the family member taken advantage of was a direct result of trusting his or her relative. I believe that the breach of this trust by the perpetrator in these situations came about primarily because the "family" relationship blinded others from recognizing the real agenda at work.
Based upon the foregoing, I recommend that as attorneys we do not allow "family" prejudices or beliefs to blind us from discovering and remedying matters. As disturbing as it may be for a family member to take advantage of his parents and/or siblings, I believe it is even more devastating to allow the wrongdoer to not only escape, but also to profit at the expense of those unable or unwilling to stop him. Family does matter, and family members who take unfair advantage must be revealed and held accountable.
Frederick E. Roth of the Roth Law Firm of Naperville, Illinois concentrates his law practice in business and estate litigation and business transactions. Mr. Roth graduated from the University of Illinois with a B.S. in Accountancy, and from The John Marshall Law School of Chicago, Illinois.