Trustee of inherited business

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Determined
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Trustee of inherited business

Post by Determined » Mon Nov 05, 2018 5:26 pm

I am the successor trustee of my dad's small business. My brother and I are the beneficiaries. My dad passed almost five years ago from cancer and my mom unexpectedly passed 21 months ago

Neither of us work for the company. I live and teach in the same town. My brother is an expat living in Canada.
I don't know much about running a company. He knows more about it, but doesn't plan to make it his full time job.

As a trustee, do I have say over him as to what decisions are made? I would really like to hire a CEO. We have co-managers on the production floor which is how my dad left it for my mom. She was retired and also did not work for the business. No one runs sales anymore.

He is my only family. We are in our 40s and have on okay relationship. I don't want to become estranged, but I disagree with him on quite a bit. I am not very assertive, and this is not in my comfort zone.

I don't feel comfortable talking to the lawyer handled all my parents trusts and such, but maybe I should.

I could ask him to buy me out. There is a good amount of debt that we are working aggressively to pay down and a large personal loan from my parents.

Everything else about settling my mom's estate went well. I really dislike having to try to balance this in my life.

Gill
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Re: Trustee of inherited business

Post by Gill » Mon Nov 05, 2018 7:02 pm

I would seriously consider hiring a corporate trustee. One leader in the field of managing family businesses such as this is Northern Trust Company of Chicago with many other offices. They have a small business division with long experience with businesses such as yours. Give them a call.
Gill

Determined
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Re: Trustee of inherited business

Post by Determined » Mon Nov 05, 2018 8:26 pm

Thank you. That is a good suggestion. Only I can decide what is worth creating issues between my brother and me, but I need to feel more confident in my options

J295
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Re: Trustee of inherited business

Post by J295 » Mon Nov 05, 2018 8:41 pm

Get lawyer. Sell company

Gill
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Re: Trustee of inherited business

Post by Gill » Mon Nov 05, 2018 9:32 pm

Your one question about your authority wasn’t answered. Are you sole trustee? If so, you are the owner of the business and have complete control of the business if the majority of the stock is held in the trust.
Gill

Determined
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Re: Trustee of inherited business

Post by Determined » Mon Nov 05, 2018 10:21 pm

Gill wrote:
Mon Nov 05, 2018 9:32 pm
Your one question about your authority wasn’t answered. Are you sole trustee? If so, you are the owner of the business and have complete control of the business if the majority of the stock is held in the trust.
Gill
I am the sole trustee and the business owns all the stock. My brother calls himself the owner.

Gill
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Location: Florida

Re: Trustee of inherited business

Post by Gill » Tue Nov 06, 2018 6:53 am

Determined wrote:
Mon Nov 05, 2018 10:21 pm
Gill wrote:
Mon Nov 05, 2018 9:32 pm
Your one question about your authority wasn’t answered. Are you sole trustee? If so, you are the owner of the business and have complete control of the business if the majority of the stock is held in the trust.
Gill
I am the sole trustee and the business owns all the stock. My brother calls himself the owner.
You mean the trust owns all the stock? Unless there is something to the contrary in the articles of incorporation or the trust instrument, you have sole authority to make all the decisions. Your brother is not the owner.
Gill

Determined
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Re: Trustee of inherited business

Post by Determined » Tue Nov 06, 2018 4:15 pm

Gill wrote:
Tue Nov 06, 2018 6:53 am
Determined wrote:
Mon Nov 05, 2018 10:21 pm
Gill wrote:
Mon Nov 05, 2018 9:32 pm
Your one question about your authority wasn’t answered. Are you sole trustee? If so, you are the owner of the business and have complete control of the business if the majority of the stock is held in the trust.
Gill
I am the sole trustee and the business owns all the stock. My brother calls himself the owner.
You mean the trust owns all the stock? Unless there is something to the contrary in the articles of incorporation or the trust instrument, you have sole authority to make all the decisions. Your brother is not the owner.
Gill
Correct.

Determined
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Re: Trustee of inherited business

Post by Determined » Tue Nov 06, 2018 4:22 pm

My brother is coming to town Friday because of the Canadian long weekend. He has a meeting set up with the accountant and plans to be at the plant. I will not be part of any of this as I have my own job. I have the authority to prevent him from meeting or even going to the plant? That's not something I want to do, but I clearly have not established any boundaries. I am not concerned about the hat he will cayluse a problem except that it perpetuates his belief that he is an owner. He is a beneficiary.

Gill
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Re: Trustee of inherited business

Post by Gill » Tue Nov 06, 2018 4:25 pm

I sense you are struggling with this situation and don't have all the expertise needed to oversee an ongoing business. If this situation continues for too long it could lead to a diminution in value of the business and possibly its loss entirely. This would be unfortunate for both you and your brother. This seems like a perfect situation for considering the sale of the business.

I would suggest you contact the nonprofit organization SCORE (Service Corps of Retired Executives) which is an organization of retired business owners and executives who voluntarily advise small businesses. It would certainly be a place to start and quite likely they could lead you in the right direction.
Gill
Last edited by Gill on Tue Nov 06, 2018 4:32 pm, edited 1 time in total.

Gill
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Re: Trustee of inherited business

Post by Gill » Tue Nov 06, 2018 4:29 pm

Determined wrote:
Tue Nov 06, 2018 4:22 pm
My brother is coming to town Friday because of the Canadian long weekend. He has a meeting set up with the accountant and plans to be at the plant. I will not be part of any of this as I have my own job. I have the authority to prevent him from meeting or even going to the plant? That's not something I want to do, but I clearly have not established any boundaries. I am not concerned about the hat he will cayluse a problem except that it perpetuates his belief that he is an owner. He is a beneficiary.
You most certainly have that authority. He has no right to even be in the plant or speak with the accountant. I would alert the accountant that he has no authority to speak for the business. You really need to set that boundary with your brother that he is only the beneficiary of the trust and that you have sole authority over the business as sole trustee of the trust. You also need an attorney at your elbow to assist you with these dealings.
Gill

Determined
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Re: Trustee of inherited business

Post by Determined » Tue Nov 06, 2018 8:24 pm

Gill wrote:
Tue Nov 06, 2018 4:29 pm
Determined wrote:
Tue Nov 06, 2018 4:22 pm
My brother is coming to town Friday because of the Canadian long weekend. He has a meeting set up with the accountant and plans to be at the plant. I will not be part of any of this as I have my own job. I have the authority to prevent him from meeting or even going to the plant? That's not something I want to do, but I clearly have not established any boundaries. I am not concerned about the hat he will cayluse a problem except that it perpetuates his belief that he is an owner. He is a beneficiary.
You most certainly have that authority. He has no right to even be in the plant or speak with the accountant. I would alert the accountant that he has no authority to speak for the business. You really need to set that boundary with your brother that he is only the beneficiary of the trust and that you have sole authority over the business as sole trustee of the trust. You also need an attorney at your elbow to assist you with these dealings.
Gill
The uncomfortable part is that we have been working as co-owners. I don't know how to tactfully correct this after almost two years. Should I go to the lawyer who set up the trust? He knows my brother and I have been working together.

J295
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Re: Trustee of inherited business

Post by J295 » Tue Nov 06, 2018 8:32 pm

Reading the dialogue with Gill and OP .....

OP should recognize that he has not only certain rights as the sole Trustee, but also certain responsibilities to the beneficiaries (which include his brother). Breach those responsibilities and subject yourself to legal liability. This wouldn't be the first time one family member sued another, especially following a death.

Is there a reason you as Trustee are hanging onto this asset which you admit you "don't know much about running" rather than liquidating?

Determined
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Re: Trustee of inherited business

Post by Determined » Tue Nov 06, 2018 10:29 pm

J295 wrote:
Tue Nov 06, 2018 8:32 pm
Reading the dialogue with Gill and OP .....

OP should recognize that he has not only certain rights as the sole Trustee, but also certain responsibilities to the beneficiaries (which include his brother). Breach those responsibilities and subject yourself to legal liability. This wouldn't be the first time one family member sued another, especially following a death.

Is there a reason you as Trustee are hanging onto this asset which you admit you "don't know much about running" rather than liquidating?
I have not breached any responsibilities to the beneficiaries. My and my brother's involvement have been to be in regular contact with the plant managers and the accountant, approve spending decisions, and discuss concerns.

As mentioned previously, there is a lot of debt including a large personal loan owed to my parents which they used to keep the company afloat in 2008. The company is making money. What it is lacking is a CEO since my dad died.
Last edited by Determined on Tue Nov 06, 2018 10:44 pm, edited 1 time in total.

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Sandtrap
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Re: Trustee of inherited business

Post by Sandtrap » Tue Nov 06, 2018 10:43 pm

As a responsible steward of your parent's estate:

1. Meet with legal counsel asap.
2. Meet with legal counsel and brother. Clarify boundaries, etc.
3. Hire CEO or Sell.

Determined
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Re: Trustee of inherited business

Post by Determined » Tue Nov 06, 2018 10:45 pm

Sandtrap wrote:
Tue Nov 06, 2018 10:43 pm
As a responsible steward of your parent's estate:

1. Meet with legal counsel asap.
2. Meet with legal counsel and brother. Clarify boundaries, etc.
3. Hire CEO or Sell.
Thank you. This the course I am on. I emailed the attorney this evening.

Determined
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Re: Trustee of inherited business

Post by Determined » Wed Nov 07, 2018 6:49 am

What do I say when asked who owns the business? Do I say the trust and leave it at that? Do I say it is me as trustee?

Gill
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Re: Trustee of inherited business

Post by Gill » Wed Nov 07, 2018 6:55 am

Determined wrote:
Wed Nov 07, 2018 6:49 am
What do I say when asked who owns the business? Do I say the trust and leave it at that? Do I say it is me as trustee?
Yes, the trust owns the business. You don’t need to say anything about the beneficiaries of the trust.
Gill

NotWhoYouThink
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Re: Trustee of inherited business

Post by NotWhoYouThink » Wed Nov 07, 2018 9:45 am

As trustee, you have a responsibility to the beneficiaries to work to ensure the business succeeds. Letting it run on autopilot because you don't want to run a business or confront your brother isn't quite meeting that standard of duty. A business can't just run with two co-managers and no CEO. Nothing good can come of the current situation.

You can hire a CEO, you can sell the business, you can resign as trustee. But putting off decisions and conflict puts you at risk. If the business fails, your brother will likely blame you, and you could both end up spending a lot of money on lawyers.

I'm sorry your parents left you with this mess, but it probably won't clean itself up.

exHinesville
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Re: Trustee of inherited business

Post by exHinesville » Wed Nov 07, 2018 11:46 am

This is one of those situations where the welcome front of "advice of counsel" comes in handy. Rather than a confrontation with your brother, you can state that you wanted to be comfortable with your duties as the sole trustee and so you, as trustee, have hired counsel. Your brother probably won't be happy, particularly since the trust will hire and pay for the counsel, but that's the prudent course of conduct.

As a trustee, you have a fiduciary responsibility to the beneficiaries of the trust to act always with their best interests at the forefront. And -- you didn't mention that either of you have children or spouses -- consider that if your brother is succeeded by a widow and/or children, they may be inclined to examine your actions with a fine-tooth comb, even years later, and that kind of examination can be financially and emotionally expensive.

While I agree that your brother has no right [unless there are oddities in your local law] to come to the business and insert himself as manager, the more transparent you can be with the operations and finances, the less likely you are to find yourself in someone's cross-hairs at a later date on the argument that you were hiding your decisions. [If he has a friendly person at the company, he's going to know what's happening, anyway.] However, the CPA and the business operators need to understand that while he may be an interested beneficiary, you are the decision maker. This is another place where the dispassionate voice of authority, i.e., trust counsel, is very useful.

Determined
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Re: Trustee of inherited business

Post by Determined » Wed Nov 07, 2018 4:05 pm

Thank you. All of this is very helpful. There is no issue with transparency. Rightly or wrongly, he has had access to all the same financial reports I have. We have been making decisions together.

I first brought up the conversation about a CEO a little over a year ago. He pushed back hard. I did not understand/believe the decision was solely mine. That's where the family relationship, of course, muddies things.

He has a spouse and minor children. I am engaged, have two adult children, and a minor child. My assests are in a minor"s protection trust for what it's worth.

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