It is an all-too-common problem: A family business is decimated following a patriarch’s death because of feuding and fighting between family members over the estate. Preventing family feuds and ensuring seamless transfers of assets is the centerpiece of all estate planning efforts. But that need is paramount when certain issues are at play–such as a family business. It is important to remember that this planning invovles much more than just creating a will. Instead, long-term thinking is needed which looks not just as who should inherit certain pieces of property immediately, but instead considers how the business might look decades into the future. Thinking only about who will receive the assets immediately upon a death can lead to mistakes, particuarly because once those assets are transfered, the new owner can do whatever he or she likes with them.
The dangers of thinking too provincially on these issues are demonstrated in a high-proifile family estate planning feud that raged over the past few years. The Journal-Sentinel reported on the fighting surrouding the assets once own by David Derzon–the founder of a well-known coin and collectibles business. Mr. Derzon died in 2008, leaving all of his assets to his second wife (who he had been married to for 30 years). Mrs. Derzon ultimately died 8 months after her husband. However, within that 8 month time-frame Mrs. Derzon apparently drafted a new will which cut out Mr. Derzon’s own two sons and entirely removed the family fortunate from the Derzon name. Instead, the new will provides mostly for Mrs. Derzon’s half sister. This is surprising, considering that the half-sister admits to not seeing her sibling for decades at at time before befriending her again only shortly before her death.
As expected, this led to a protracted legal battle with upwards of $3 million at stake–including ownership of the business itself.
The main issue in the legal battle was whether or not the half-sister unduely influenced the ailing woman to change her will. Also, lawyers for the disinherted sons argued that Mrs. Derzon’s mental state was a concern at the time that her will was re-written. They point out that she was depressed and frequently intoxicated following her husband’s death. However, because Mrs. Derzon received all of her husband’s assets without condition, she was free to pass them on however she saw fit. However, in August a judge voided the second will, claiming that the step-sister exercised undue influence on the woman who may not have been in her right mind when signing the second will.
It is only this week–four years after the deaths–that the business was re-opened under the stewardship of the two sons. While it is fortuante that the business in this case was able to survive the prolonged estate fight, many other companies might not have been able to do so. The story is a clear reminder of the need for all families, particuarly those with businesses and unique family dynamics, to think through all possible situations when conducting estate planning.
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