Conflicts often occur over the value of a business that’s involved in an estate, especially when the beneficiaries of the estate disagree on one or more factors. Sometimes, the disputes boil over and can’t be resolved without legal action.
There are often complex emotional and legal factors that are involved when it comes to these kinds of disputes. Here are the major sticking points in many cases.
Complex valuation
It can be very difficult to value a business accurately – especially when there are “soft” or intangible assets that have to be considered such as the brand’s reputation and goodwill. Market conditions, industry trends and future growth potential can all affect a company’s value, and there are multiple ways to calculate its worth. If the heirs don’t agree on how to go about that process, that can easily lead to litigation.
Poor succession planning
If the deceased didn’t leave a detailed succession plan, that can provoke a lot of misunderstanding or flat-out battles over ownership and control. Some family members may even have relied on verbal promises and be pretty upset when those aren’t written down.
Unequal distributions
Some beneficiaries may feel that they are not receiving their fair share of the business based on their involvement with the company or their contributions to the company’s prior success. Disagreements about what’s fair can easily erupt into legal action.
Ideally, business owners will have a clear and comprehensive estate plan in place that addresses all these concerns – but that doesn’t always happen. If you find yourself mired in a dispute over a family business, it’s wise to seek experienced legal guidance right away.