When a wealth transition is not planned successfully, it can put a family in conflict and send them into a financial and emotional crisis. Here is one story about wealth transition and how unaddressed conflict in a family and lack of communication can tear families apart.
The Bailey Family: Based on a true story of family wealth transition
Mr. and Mrs. Bailey, both in their 60s, have two children Jeff and Anne. Jeff and his wife, Sue, have three children. Anne is single and does not have any children. Mr. and Mrs. Bailey worked very hard in BizCo the business they founded over 35 years ago.
Through the growth in value of BizCo, as well as savvy personal investments, the Baileys accumulated significant wealth and decided it was time to think about the future of BizCo and what to do with their wealth. Jeff rose to a senior executive position in BizCo and was responsible for its recent substantial growth, but Anne insisted she had no interest in the family business and refused to take on any role in the company. Jeff often butted heads with his dad, especially over Anne’s refusal to help out at BizCo.
The Baileys had not developed communication, conflict resolution, or decision-making skills as a family unit. Conflicts were left unaddressed and tensions among family members built up. Their family dynamics were unhealthy and at times downright dysfunctional. These conflicts exposed vulnerabilities in the family business and the family itself. Unfortunately, this story is one that is all too common.
Without consulting Jeff or Anne, Mr. Bailey engaged accounting, tax, and estate planning advisors to develop a business transition strategy and estate plan.
Not surprisingly, when Mr. Bailey presented this plan to his family, they blew up at him. Jeff threatened to withdraw from the business and Sue threatened to prevent the grandparents from seeing their grandchildren. Anne stormed out of the room and refused to have further discussions with anyone.
Mrs. Bailey was terribly upset at the thought of never seeing her grandchildren and was surprised by Jeff, Sue and Anne’s reaction to what she and Mr. Bailey thought seemed like a very good and fair plan.
Fortunately, the Baileys agreed to retain an experienced mediator. Each family member was individually engaged by the mediator in the design of their mediation process. This is an important step as it helps to create a sense of ownership over the process. It allows participants to actively create their own solution rather than having a decision imposed on them. The mediator was empowered by their agreement to intervene in the difficult conversations about the family’s troubled past and to help them stay focused on what they wanted for their shared future.
The mediation did not lead to instantaneous peace and reconciliation, as there is no quick-fix in these complex situations. However, by negotiating an agreement on a direction for the succession of the family assets, they established a shared vision for future communication and collaboration in the family and a commitment to further family counseling. The technical advisors were re-engaged, leading to an effective wealth transition plan that was agreed to by all family members.
Mr. Bailey told the mediator that the mediation had “saved his family”.
This article was authored by Dave Gould, with help from Cindy Radu.
David Gould LLB QC C Med
Cindy Radu FCPA, LLB, LLM, TEP, ICD.D
For help managing a high-conflict wealth transition, or to learn about how we can help you prepare for these conflicts, feel free to contact me today. I offer conflict coaching, conflict management training, and mediation services.