Trustee of inherited business

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Topic Author
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
...just “chiming in” as described by Livesoft

Topic Author
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
...just “chiming in” as described by Livesoft

Topic Author
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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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
...just “chiming in” as described by Livesoft

Topic Author
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.

Topic Author
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.
...just “chiming in” as described by Livesoft

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
...just “chiming in” as described by Livesoft

Topic Author
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?

Topic Author
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.

Topic Author
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.

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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
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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.

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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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Determined
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Re: Trustee of inherited business

Post by Determined » Mon Nov 26, 2018 7:39 pm

Update

I met with a new lawyer last week and am getting a few more documents around. Meanwhile, I asked the accounts person to send me a couple of invoices, and she copied my brother on it. Now he is questioning why I am doing things without him. I told him I was following up on my trustee duties. His response "Really, the trustee duties. Not the owner? What's going on?"
I responded that he and I are beneficiaries and the trust owns the company. There are things that need to be addressed and haven't.
Now he is talking about our partnership and how we have been in this together. He wants to know if I have made other financial requests or plans.

I haven't replied yet since I am trying to sort through all the personal and emotional reactions so I can stick to the facts. We are partners in that we are the beneficiaries. I have the sole legal responsibility as trustee. And frankly, if he had not blown me off when I pointed out things before, he would be in the loop.

Nutmeg
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Re: Trustee of inherited business

Post by Nutmeg » Mon Nov 26, 2018 10:34 pm

I suggest working with the attorney to clarify the legal situation. As a retired attorney (and the trustee of several trusts), this stood out to me:
We are partners in that we are the beneficiaries.
Actually, if you are the trustee of a trust that owns the shares of a company, you and your brother are not partners, and your brother is not an owner. As a trustee, you can choose to ask your brother or anyone else for advice, but he doesn’t have the legal right to receive information about every step you take. State law governs the duties of the trustee, and the trust document should indicate which state that is. Given the circumstances, it is probably the state in which the company is located, but you should check to make sure. At least one state with which I am familiar requires the trustee to send an annual report to each beneficiary, but that is a far cry from allowing a beneficiary to make minor decisions.

I am glad you have consulted an attorney and hope the attorney will help you straighten out the situation!

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Determined
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Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 6:05 pm

[Thread merged into here, see below (next page) --admin LadyGeek]

viewtopic.php?f=2&t=263196&p=4202730#p4202730

This is the original post. I followed up by meeting with a new lawyer last week. The short story is as follows. I requested that some documents form the accountant. She replied and copied my brother. My brother is mad that he didn't know I asked for anything. I told him I was following my duties as trustee. He questioned why not the owners. I replied that he and I are beneficiaries of the trust, and the trust owns the company. I just received an email he sent to me and the original lawyer requesting that the trust be dissolved. Does he have that right?

johnubc
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Re: Trustee of Inherited Business continued

Post by johnubc » Tue Nov 27, 2018 6:18 pm

I am not a lawyer - so will not answer your question. My advice is to convince both you and your brother to sell the business.

NotWhoYouThink
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Re: Trustee of Inherited Business continued

Post by NotWhoYouThink » Tue Nov 27, 2018 6:37 pm

He has the right to send an email.

Whether he'll get what he wants depends on a lot of things, including how the trust was written. Does it give the beneficiaries the right to terminate the trust or to change or replace the trustees?

IIRC, you had previously been very hands off with the business, so that he may have a claim that you weren't meeting the requirements of the trustee. But if it gets into that kind of claim process the only people making money are the lawyers.

Do you want to run the business? If not, do you want your brother running the business? If you don't think either of you should be running the business you should sell it. You'll need to educate yourself enough to know what it might be worth.

Gill
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Re: Trustee of Inherited Business continued

Post by Gill » Tue Nov 27, 2018 6:41 pm

We don’t know the terms of the trust, but it is not likely that he can have it dissolved. My sense is that this situation is spiraling downward and you should be looking at selling the business. You also need a solid lawyer at your elbow in your capacity as trustee.
Gill
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8foot7
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Re: Trustee of Inherited Business continued

Post by 8foot7 » Tue Nov 27, 2018 6:52 pm

This process would be a lot easier if you would be transparent with your brother and not try to keep things from him. Even if II end up taking actions as trustee with which he disagrees, a veil of secrecy can’t really serve to warm relations between you.

GibsonL6s
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Re: Trustee of Inherited Business continued

Post by GibsonL6s » Tue Nov 27, 2018 7:42 pm

Get a lawyer and figure out what you are "required" to do under the documents and make sure you are doing these at a minimum. Then figure out what else you want to provide and discuss with your brother.

Given that neither of you work in the business, who is "watching the store" and controlling the money? Is there even going to be a business if you don't agree on a direction and figure out how to alleviate the concerns of the key people at the business with respect to their future. In other words don't be the the two guys in the cartoon fighting in the boat who see the waterfall too late.

Good luck

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 8:52 pm

8foot7 wrote:
Tue Nov 27, 2018 6:52 pm
This process would be a lot easier if you would be transparent with your brother and not try to keep things from him. Even if II end up taking actions as trustee with which he disagrees, a veil of secrecy can’t really serve to warm relations between you.
Everything has been completely transparent up until this point. It may have been mistake not to mention to him that asked for some documents, but I expect we would be in the same place if I had.

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 8:56 pm

GibsonL6s wrote:
Tue Nov 27, 2018 7:42 pm
Get a lawyer and figure out what you are "required" to do under the documents and make sure you are doing these at a minimum. Then figure out what else you want to provide and discuss with your brother.

Given that neither of you work in the business, who is "watching the store" and controlling the money? Is there even going to be a business if you don't agree on a direction and figure out how to alleviate the concerns of the key people at the business with respect to their future. In other words don't be the the two guys in the cartoon fighting in the boat who see the waterfall too late.

Good luck
This one of the disagreements. I suggested over a year ago that we should consider hiring a CEO. He wouldn't entertain the idea at all. My mother had contracted an accountant ti do payroll, A/R and some CFO type duties. He says that is working fine.

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 9:02 pm

Gill wrote:
Tue Nov 27, 2018 6:41 pm
We don’t know the terms of the trust, but it is not likely that he can have it dissolved. My sense is that this situation is spiraling downward and you should be looking at selling the business. You also need a solid lawyer at your elbow in your capacity as trustee.
Gill
Gill,
You have commented on quite a few of my posts, and I greatly appreciate them. As you can tell, I struggle with following through as my emotional side takes over. I went back and reread the previous thread.

The trust does say the assets are to be distributed after the death of my mother, the trustee of my dad's trust.. The lawyer said as much in the summer of 2016 and never followed up.

I met with a new lawyer last Wednesday and emailed her tonight.

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 9:05 pm

johnubc wrote:
Tue Nov 27, 2018 6:18 pm
I am not a lawyer - so will not answer your question. My advice is to convince both you and your brother to sell the business.
My brother will not sell. He wants to own the business. He says he wants it to be a partnership between us because that's what (he thinks) Dad intended.

Gill
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Re: Trustee of Inherited Business continued

Post by Gill » Tue Nov 27, 2018 9:09 pm

Determined wrote:
Tue Nov 27, 2018 9:02 pm
Gill wrote:
Tue Nov 27, 2018 6:41 pm
We don’t know the terms of the trust, but it is not likely that he can have it dissolved. My sense is that this situation is spiraling downward and you should be looking at selling the business. You also need a solid lawyer at your elbow in your capacity as trustee.
Gill
Gill,
You have commented on quite a few of my posts, and I greatly appreciate them. As you can tell, I struggle with following through as my emotional side takes over. I went back and reread the previous thread.

The trust does say the assets are to be distributed after the death of my mother, the trustee of my dad's trust.. The lawyer said as much in the summer of 2016 and never followed up.

I met with a new lawyer last Wednesday and emailed her tonight.
Determined, that information changes everything. Legally, upon the death of your mother the trust terminated and should only be held open to complete administrative matters. You need to get in the hands of a lawyer to assist you in the final matters of terminating the trust and distributing the assets.
Gill
...just “chiming in” as described by Livesoft

Gill
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Re: Trustee of Inherited Business continued

Post by Gill » Tue Nov 27, 2018 9:11 pm

Determined wrote:
Tue Nov 27, 2018 9:05 pm
johnubc wrote:
Tue Nov 27, 2018 6:18 pm
I am not a lawyer - so will not answer your question. My advice is to convince both you and your brother to sell the business.
My brother will not sell. He wants to own the business. He says he wants it to be a partnership between us because that's what (he thinks) Dad intended.
He can’t keep you from selling your interest. Again, you need to be represented by a competent lawyer. Is there any chance either of you will have a majority interest or is the ownership exactly 50-50? Are there other shareholders? I’m assuming this is a corporation.
Gill
...just “chiming in” as described by Livesoft

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 9:26 pm

Gill wrote:
Tue Nov 27, 2018 9:11 pm
Determined wrote:
Tue Nov 27, 2018 9:05 pm
johnubc wrote:
Tue Nov 27, 2018 6:18 pm
I am not a lawyer - so will not answer your question. My advice is to convince both you and your brother to sell the business.
My brother will not sell. He wants to own the business. He says he wants it to be a partnership between us because that's what (he thinks) Dad intended.
He can’t keep you from selling your interest. Again, you need to be represented by a competent lawyer. Is there any chance either of you will have a majority interest or is the ownership exactly 50-50? Are there other shareholders? I’m assuming this is a corporation.
Gill
This is an S Corp. It is possible that the trustee decides how the assets are distributed. The building is also owned by the trust and the company pays rent. There are no other shareholders.

I expect to hear from the new attorney tomorrow as well as the current attorney on the trust.

Gill
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Re: Trustee of Inherited Business continued

Post by Gill » Tue Nov 27, 2018 9:34 pm

You quite likely need two attorneys, one representing you as trustee and the other protecting your individual interests. From what you have described, your goal should be to distribute the trust according to its terms and liquidate your own interests so you are no longer involved with the business. If your brother is anxious to continue with the business, sell to him.
Gill
...just “chiming in” as described by Livesoft

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 9:43 pm

I wouldn't have thought of that. Would I need to go to a new firm to get a lawyer for myself?

jminv
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Re: Trustee of Inherited Business continued

Post by jminv » Tue Nov 27, 2018 9:45 pm

Determined wrote:
Tue Nov 27, 2018 6:05 pm
viewtopic.php?f=2&t=263196&p=4202730#p4202730

This is the original post. I followed up by meeting with a new lawyer last week. The short story is as follows. I requested that some documents form the accountant. She replied and copied my brother. My brother is mad that he didn't know I asked for anything. I told him I was following my duties as trustee. He questioned why not the owners. I replied that he and I are beneficiaries of the trust, and the trust owns the company. I just received an email he sent to me and the original lawyer requesting that the trust be dissolved. Does he have that right?
You should talk to your lawyer about whether he has the right or not. We don’t know all the details of the trust, only you and your lawyer do. It seems like from what you said that the trust should already have been dissolved since your mother passed.

It sounds like it’s some sort of cyclical manufacturing business. Neither of you are very involved and it’s carrying debt used to save the business in the last recession which is still high 10 years on. What would happen if there’s a recession and demand plummets? Could (would) you take on more debt or would it just fold? Would you and your brother be willing to personally guarantee the debt since that might be what’s required? The resistance to the ceo position is probably a cost and especially a control issue for your brother. It’s likely a good point to sell the company for a healthy multiple on the open market to someone who will take an active day to day role in the company. Or get your brother to buy you out if he wants it so badly. Or sell it to one or both of the current co-managers (probably easiest to sell to one or both of them if your brother doesn’t want to sell). Since you are both equal beneficaries, you should be able to sell your own interest even if he remains obstinate.

It doesn’t make sense to be absentee owners of a cyclical manufacturing business. If it’s uncomfortable now, it’ll be very unpleasant if the business is under financial stress. It’ll be very stressful, one of you will end up moving there to try to salvage it, and it might fail in the end. Sell your half with or without him.

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Tue Nov 27, 2018 9:59 pm

jminv wrote:
Tue Nov 27, 2018 9:45 pm
Determined wrote:
Tue Nov 27, 2018 6:05 pm
viewtopic.php?f=2&t=263196&p=4202730#p4202730

This is the original post. I followed up by meeting with a new lawyer last week. The short story is as follows. I requested that some documents form the accountant. She replied and copied my brother. My brother is mad that he didn't know I asked for anything. I told him I was following my duties as trustee. He questioned why not the owners. I replied that he and I are beneficiaries of the trust, and the trust owns the company. I just received an email he sent to me and the original lawyer requesting that the trust be dissolved. Does he have that right?
You should talk to your lawyer about whether he has the right or not. We don’t know all the details of the trust, only you and your lawyer do. It seems like from what you said that the trust should already have been dissolved since your mother passed.

It sounds like it’s some sort of cyclical manufacturing business. Neither of you are very involved and it’s carrying debt used to save the business in the last recession which is still high 10 years on. What would happen if there’s a recession and demand plummets? Could (would) you take on more debt or would it just fold? Would you and your brother be willing to personally guarantee the debt since that might be what’s required? The resistance to the ceo position is probably a cost and especially a control issue for your brother. It’s likely a good point to sell the company for a healthy multiple on the open market to someone who will take an active day to day role in the company. Or get your brother to buy you out if he wants it so badly. Or sell it to one or both of the current co-managers (probably easiest to sell to one or both of them if your brother doesn’t want to sell). Since you are both equal beneficaries, you should be able to sell your own interest even if he remains obstinate.

It doesn’t make sense to be absentee owners of a cyclical manufacturing business. If it’s uncomfortable now, it’ll be very unpleasant if the business is under financial stress. It’ll be very stressful, one of you will end up moving there to try to salvage it, and it might fail in the end. Sell your half with or without him.
Cost of a CEO is certainly a concern, but control is more of the issue. We have discussed that when the next downturn happens, neither of us will be loaning the business money. We just disagree on how to handle it. I live and teach in the town.. He lives in Canada.

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BolderBoy
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Re: Trustee of Inherited Business continued

Post by BolderBoy » Tue Nov 27, 2018 10:09 pm

johnubc wrote:
Tue Nov 27, 2018 6:18 pm
My advice is to convince both you and your brother to sell the business.
+1. This is the wisest advice I've ever heard.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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celia
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Re: Trustee of Inherited Business continued

Post by celia » Tue Nov 27, 2018 10:41 pm

Gill wrote:
Tue Nov 27, 2018 9:11 pm
Determined wrote:
Tue Nov 27, 2018 9:05 pm
johnubc wrote:
Tue Nov 27, 2018 6:18 pm
I am not a lawyer - so will not answer your question. My advice is to convince both you and your brother to sell the business.
My brother will not sell. He wants to own the business. He says he wants it to be a partnership between us because that's what (he thinks) Dad intended.
He can’t keep you from selling your interest. Again, you need to be represented by a competent lawyer. Is there any chance either of you will have a majority interest or is the ownership exactly 50-50? Are there other shareholders? I’m assuming this is a corporation.
Gill
The way to look at this is that it is a common problem after someone dies. Whether a house, farm, business, or other large asset is involved, the beneficiaries often want different end results. Rarely, do they agree, especially with a large number of heirs. But from a practical perspective, think about what would happen when one of the "owners" dies or wants to cash out. Will their share now be taken over by their surviving spouse, kids, or sold to an outside party? If you think of the original dynamics, they will likely be mild in comparison to what can happen down the road.

To "prevent" these problems, the only reasonable solution is to sell the asset soon after death of the parents and give the heirs their share in cash.

And even if your dad wanted you to own half of the business, if you don't want to, that's fine, too. Don't be bullied into re-arranging your life to do something that does not appeal to you.

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Re: Trustee of Inherited Business continued

Post by bsteiner » Tue Nov 27, 2018 11:28 pm

There are some special requirements for trusts to be able to own S corporation shares. Did the trust satisfy them?

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Wed Nov 28, 2018 5:31 am

bsteiner wrote:
Tue Nov 27, 2018 11:28 pm
There are some special requirements for trusts to be able to own S corporation shares. Did the trust satisfy them?
I have absolutely no idea. This has never been brought up.

I did a little reading. There was teference to a limit of two years.it will be two years January 21. Whose responsibility was it to know this? I asked a long time ago how long the trust could stay open. This never came up. The law firm knows it is still open because I requested a list if the assests last week and he are in the process of getting a new mortgage lender. I had to provide an affidavit as trustee.
Last edited by Determined on Wed Nov 28, 2018 11:48 am, edited 1 time in total.

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Re: Trustee of Inherited Business continued

Post by Gill » Wed Nov 28, 2018 7:28 am

Determined wrote:
Tue Nov 27, 2018 9:43 pm
I wouldn't have thought of that. Would I need to go to a new firm to get a lawyer for myself?
Yes, so there’s no conflict of interest.
Gill
...just “chiming in” as described by Livesoft

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Re: Trustee of Inherited Business continued

Post by Murgatroyd » Wed Nov 28, 2018 8:14 am

My 2 cents. You are in the drivers seat. Your brother wants the business and you do not. Work with your counselor to value the business and let your brother know that you are open to selling for the best price. Are there key employees who might want to buy in? Some risk but the status quo isn’t working.

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Re: Trustee of Inherited Business continued

Post by J295 » Wed Nov 28, 2018 8:34 am

Get a capable lawyer, or two if needed. This is not complicated for a capable lawyer. Anonymous postings from boggleheads to you, even from those who are lawyers, are only marginally helpful at best. The lawyers are trying to be helpful, but if asked I’m sure they would admit that they are giving you suggestions based upon bits and pieces of information which are incomplete facts. For example, and this is quite significant, none of them have seen the pertinent trust and related documents.

One question I’d want the lawyer to answer is what action do you need to take given that the trust agreement, as you have described it, apparently required you as the trustee to take action within a reasonable time beginning in the summer of 2016 to dissolve the trust and that has not occurred more than two years later?

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Re: Trustee of Inherited Business continued

Post by Sandtrap » Wed Nov 28, 2018 8:49 am

"Depending" on the provisions of the trust, all beneficiaries can unanimously agree to a provision change (which might include a sale and dispersement of proceeds).
Highly recommend you talk this over with legal counsel.

Sometimes, if not often, the end result is a decision between keeping family intact or business intact.
And.
Sometimes, even after dissolution and dispersement of proceeds, the family remains fractured.

Again, seek legal counsel for "private" consult and make some hard decisions.

Good luck.
j

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Determined
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Re: Trustee of Inherited Business continued

Post by Determined » Wed Nov 28, 2018 11:46 am

J295 wrote:
Wed Nov 28, 2018 8:34 am
Get a capable lawyer, or two if needed. This is not complicated for a capable lawyer. Anonymous postings from boggleheads to you, even from those who are lawyers, are only marginally helpful at best. The lawyers are trying to be helpful, but if asked I’m sure they would admit that they are giving you suggestions based upon bits and pieces of information which are incomplete facts. For example, and this is quite significant, none of them have seen the pertinent trust and related documents.

One question I’d want the lawyer to answer is what action do you need to take given that the trust agreement, as you have described it, apparently required you as the trustee to take action within a reasonable time beginning in the summer of 2016 to dissolve the trust and that has not occurred more than two years later?
I incorrectly stated 2016. She died in January of 2017. This might be significant because of the question about a trust holding shares if an S Corp.

And thank you for your caution about anonymous advice. I do have counsel looking at the trust and will keep in mind that I may need my own.
Last edited by Determined on Wed Nov 28, 2018 12:08 pm, edited 1 time in total.

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Re: Trustee of Inherited Business continued

Post by bsteiner » Wed Nov 28, 2018 11:55 am

Determined wrote:
Wed Nov 28, 2018 11:46 am
J295 wrote:
Wed Nov 28, 2018 8:34 am
... This is not complicated for a capable lawyer. Anonymous postings from bogleheads to you, even from those who are lawyers, are only marginally helpful at best. The lawyers are trying to be helpful, but if asked I’m sure they would admit that they are giving you suggestions based upon bits and pieces of information which are incomplete facts. For example, and this is quite significant, none of them have seen the pertinent trust and related documents.
...
I incorrectly stated 2016. She died in January of 2017. This might be significant because of the question about a trust holding shares if an S Corp.

And thank you for your caution about anonymous advice.
When she died might or might not be significant. Was the trust eligible to own S shares while she was living?

J295 is correct. With all of the facts, this might not be complicated. But without all the facts, it's hard to know how best to proceed other than to consult with competent tax/estates counsel.

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