What Does 2011 Mean to Family Enterprises?

Congress has given U.S. families and family enterprises a risky gift. Over the next two years, individuals may be able to gift up to $5 million without paying a gift tax. According to our trusted advisor, Peter Berenson, CPA, “The $5,000,000 is a lifetime exclusion above and beyond the $13,000 per recipient annual exclusion. So, this means that couples could divest themselves of $ 10,000,000 over the next two years, assuming they have made no previous taxable gifts. In addition, each individual can gift up to $13,000 per year to each recipient, so this can be quite meaningful if there are a lot of recipients.”

We urge that you speak with your accountant or tax attorney for more details and to make the most of this opportunity. But we do not suggest that tax savings alone drive the transfer of wealth. We also urge family members to look at the bigger picture, asking questions such as:

• If you gift aggressively, will you be able to retain your financial independence?
• What does the impact of aggressive gifting have on the recipients?
• Are you transferring assets in your family enterprise to all family members i ncluding spouses and grandchildren?
• What are the consequences of that in the event that a marriage fails?
• How does a transfer of assets to family members who do not work in the business impact those who do work in the business?
• What impact will that have on future generations?

While we’re not discouraging a tax effective transfer, we’re surely urging a thoughtful and in depth exploration of its consequences.

Some Golden Nuggets from Good Boss, Bad Boss by Robert Sutton

We don’t necessarily agree with all of Sutton’s ideas, but here are a few thoughts to ponder:
• “…56 percent of employees are ‘checked-out’ and ‘sleepwalking through their days.’”
• “…18 percent are actively disengaged… [and] undermine co-workers accomplishments.’”
• “The top dog sets the tone… behavior travels down…best CEOs blend top down directives with participative, shared leadership”
• “Bosses can be aggressive, competitive, passive, or submissive… moderate is the most desirable.”
• “Great bosses instill grit… they are dogged and patient… pressing others to move ever forward… they create urgency without treating life as an emergency.”
• A good characteristic is “relentless restlessness” and a “nagging conviction that nothing is quite good enough.”

So You’re in the Family Business…

Each issue, TCG features an article from the series “So You’re in the Family Business” which is a collection of short articles based on real happenings in real family businesses. Individual and company names have been altered to respect privacy. The complete set of articles can be accessed here.

This month features the fourth article titled “When Dad Isn’t Quite Ready to Let Go” in which father is reluctant to address issues in leadership succession and ownership transfer in the family business.  The children feel their father thinks he’s never going to die.  They struggle for ideas of how to get him to address the issues.
Read full article here.