What to do About Larry

What to do About Larry?

So, I’m working onLarry the Frank and Marilyn Buckman estate plan.  You remember them from the last post.  And you’ve probably figured out the reason they look familiar is they are the Buckman’s from Parenthood.( the Ron Howard film, not the TV Series), one of my top 5 favorite movies.

Frank and Marilyn have a problem.  They have a family business, but no clearly capable, or willing, family member to pass it on to.

None of the four children really make sense.  Gil (Steve Martin) might have the ability, but he has no interest in the business, plus he has series issues with his father.  Helen and Susan have their hands full with their young children and their older children as well, and, honestly, neither of them has the desire to get involved in the business.

Then of course, there’s Larry.  You remember Larry –played by Tom Hulce—“Pinto” from Animal House and Mozart from Amadeus.  His big scene in the movie is getting tossed out of a car by loan sharks. His personality is summed up early when Gil’s son asks him who the wild haired guy who just showed up unannounced at a family party is: “It’s my kid brother, Larry, your uncle. Don’t give him any money.”

He’s hardly an ideal candidate to take over the business. You may recall Frank proposed a plan for Larry to stay at home, work a 9 to 5 job and take over the business. Frank even offered to put off his planned retirement. Larry had a better plan. It involved a get rich quick scheme in Chile. That sums him up. Oh, yeah, he never paid the loan sharks, split for Chile and left his young son, Cool, with his parents. Loan sharks, by the way, have long memories.

So what’s fair?  What can Frank do?

When I talk to business owners about transitioning the business to the next generation, we talk about the three circles of family business succession: family, ownership and management.  In a first generation business, those circles overlap almost completely.  The family owns and manages the business.  For the next generation, sometimes some of those circles overlap, but usually not as much as the first generation.  Like when you have a son or daughter in the business and you transition ownership to him or her.  Sometimes, like the Buckmans, there’s little or no overlap.  In that case, I explain we can separate the management of the business and the ownership of the business.

So I talk to Frank about which of his current employees could run the business.  Would she be willing continue working as an employee? Is she interested in buying the business now?  We discuss placing the ownership of the business in a trust with Marilyn as the primary beneficiary and Gil, Helen Susan and, maybe, Larry as contingent beneficiaries, and the need to select a competent trustee to exercise voting control to ensure the business thrives.  We get his accountant involved and his financial advisor.

And we talk about Larry. We talk a lot about Larry.  He’s a lot like Frank. Full of ideas.  But he’s reckless, too.  I tell him about the importance of baking in protections so Larry doesn’t blow whatever dough he gets, including spendthrift and other creditor protections.   It’s critical that whoever controls distributions is strong enough and wise enough to resist Larry’s persuasive pitch for his next great plan.

In the end, he can’t decide about the business.  I need to push him further, and I will.  But I’ve found that business succession planning happens over a continuum, and it accelerates when the patriarch or matriarch begins to age more quickly or gets sick.

We devise a plan that at least gives Marilyn some assurance that if something happens to Frank, protections are in place to make an orderly sale or transition of the business. Marilyn wants to put a decent amount in a trust for Larry’s son Cool, since Larry may never be heard from again. Of course we include living wills, durable powers of attorney, and health care proxies.

I will talk to Frank again next year about a more definitive plan for the business.  Meanwhile, I’m scheduled to meet with Gil next week.  He’s got one kid with anxiety issues, and he’s worried about another of his sons who keeps banging his head against everything.

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