1. “It is with much happiness that we reflect on our solid family past; however, it was our concern for the future that inspired us to arrange for the business estate planning meetings that were held over the past few months. Our ideas are summarized in the enclosed document, which will be reviewed and updated on a regular basis. Most misunderstandings occur due to a lack of communication; therefore, it is our desire to continue with these open discussions. If you will share this wealth and your lives with each other, then you will have truly accomplished the goals we have set forth. With Much Love, Mom and Dad”

2. “The strategic direction and conduct of the firm has to make business and financial sense first and foremost before any other consideration. The business is a family provider, and, as such, needs to be carefully guided. A lack of success in the business will seriously undermine all other endeavors regarding family and goals.

“Our business will continue to adapt to change in order to continually improve. The business cannot be viewed as a static provider. We want to remain innovative in meeting customer needs. To do so requires a great deal of training and an organization responsive to the marketplace and the business climate.

“Further, a primary goal of our family business is to look to each other for strengths, skills, and experience in order to augment a process or decision. We try to conduct business as a team and vigorously condemn alliances that set us against each other.

“In general, we view having family members enter the business as adding to our strength. That there are overlapping generations is also a strength in that the pool of available talent in our family will ensure successful succession in most if not all management positions.”

3. “Our business philosophy effectively excludes the strategic possibilities of securing investors, going public, investing in other promising business ventures unrelated to the main focus of the business, etc.”

4. “Our business practices are honest and law-abiding and implemented with integrity.”

5. “A key family value is the unity of the family. Everyone in the family no doubt wants to retain this value. Because of the frequency of their interaction and their resources, the family members who are in the business are in an advantageous position to be a primary support for this goal. This would include such activities as actively encouraging and supporting family members to enter the business and paying travel expenses for all family members to attend family functions and get-togethers.”

1. “The family assets, currently estimated at over $___, consist of the following:

a. A portfolio of stocks and bonds

b. An IRA rollover fund

c. The apartment and house

d. Business entities that are to a large extent integrated:

I. Firm A, an S corporation, which has little resale value. Dad owns 50% of the stock, and each offspring 10%.

II. Firm B, whose assets are variably valued at up to $___, depending on the estimate of its replacement cost. Firm B is owned in its entirety by Dad.

III. Firm C, with liquid assets of more than $___. A survivor insurance policy currently in force would pay some of the estate taxes. This policy is in the amount of $___ and is owned jointly by the three siblings.”

2. “Currently, each offspring receives a gift of $___ on a birthday; were an offspring to purchase a home, they would be given $___ in a lump sum in lieu of future birthday gifts for a period of some years. No other distributions are currently being made.”

1. “Joseph has been designated as Dad’s successor in the future. Upon Dad’s death, John Jones and Pete Adams would oversee the firm, with Mother acting as owner but inactive in running the business. Within six months of death, Mother will have chosen an advisory board to assist her in evaluating how the business is being run by the managers. As Joseph becomes more experienced and skilled, his role in the business would increase proportionately.”

2. “Dad’s wishes in the event of his death include the following:

a. Mother will receive the personal assets from their holdings to do with as she deems necessary. In the event that both Mother and Dad are deceased, then these personal assets are to be divided equally among the offspring. Mother’s will provides the opportunity for Sam, our chosen successor, to buy the stock in the business.

b. After the death of both parents, all distributions and proceeds (from both personal holdings and the businesses) will go into three separate trusts that would then pass through to the offspring (in a yet to be determined manner). The trust itself can be invaded only in the case of an emergency. Distribution of the principal will be made on a deferred basis.

c. All stock in the firm will go to Mom upon Dad’s death. Dad has requested that the stock be valued at that time and that a decision be made by Mother, Sam, and their advisors regarding the firm (sell, retain, etc.). If sold, then the proceeds would go to Mom. Were Mother to retain the stock, then a buyout program for Sam will be devised to commence at some point in the future.”

1. “Joe has indicated the following:

a. He is not in the running for the presidency of the company, but rather wants to remain involved in production and materials management, with the goal of becoming vice president of production.

b. The necessary training required would entail taking classes in purchasing, materials management, finance, and management supervision, as well as continued and increased on-the-job exposure to these business matters.

c. Training in drafting would be necessary were the company to reorganize.

d. He would be evaluated along the following lines:

I. Timely and advantageous ordering and purchasing

II. Current shipping and accurate inventory control

III. How well he sources

Bob’s intentions include the following:

a. He does want to train for the presidency of the company; short of that, he would prepare himself to take responsibility for finance.

b. His training plans include finishing school, taking courses in finance and management, and possibly enrolling in an MBA course.

c. Current criteria of evaluating his performance include the following:

I. Delivery of accurate monthly statements

II. Timely invoicing

III. Overseeing credit

IV. Customer relations

V. Timely tax deposits and other governmental filings

VI. Management style and interdepartmental relations

Phil stated the following:

a. His goal is to become president and, if not that, he would focus on being in charge of data processing and the accounting department.

b. His future training includes more accounting, finance, and computer courses (systems, CAD/CAM, etc.). He also stated the possibility of enrolling in an MBA course.

c. His near-future performance would be evaluated on the basis of the following criteria:

I. Producing reports that are timely, accurate, and relevant.

II. How he interacts with other departments (i.e., how well he services their data processing needs).

Bill outlined the following:

a.Within five years he wants to be plant manager with an emphasis on developing new products and technology. Perhaps his future role might or could develop into the head of research and development.

b. He would have to concentrate on engineering courses that would enable him to meet his goals.

c. No performance criteria have been established as yet for him.

Since Dad wants to have a successor in place in five years, the following schedule has been agreed to:

Within three months (by March 1, 20__), each of the four sons will have outlined a training program for themselves, including the various courses they will be taking and where they will be taking them. In addition, each son will have established criteria for evaluating his performance for the coming year in the career path he has chosen. Each year (on or about March 1) this process of setting performance standards for the following year will be repeated. At the end of each year (by January 1), Dad will review each son’s performance on an individual basis; together they will set goals and criteria for the following year. By the end of the third year, Dad will have selected a successor and also the various vice presidencies. At that time ‘internships’ for each son will have been designed.”

2. “A candidate for president must meet the following criteria:

a. He must be a Smith (i.e., a direct descendant of Stanley and Mary Smith).

b. A potential longevity in the position of president of at least five years.

c. A business college education (at least) or its equivalent.

d. Ten years in the business.

e. Has an understanding of all the departments in the business.

f. Has to believe in the family’s values and be willing to aggressively promote them.

g. Has to be acknowledged as a leader who possesses the necessary personal and managerial traits not only by the ownership committee but also by the other family members.

h. In addition, a marketing or engineering background, though not required, is recommended.

i. Any exceptions will require written justification approved by the Ownership Committee.”

3. “Because both of my children are quite competent to take over the presidency of the firm and I believe that a business needs one person at its helm, I have decided on an impartial method of selection. Each son will have three months in which to complete a strategic business plan for the firm. They can have access to any resource the firm can offer, or (at their own expense) to any resource outside the firm. I have selected three judges to evaluate their plans. These three are successful business owners in their own right, each having a particular skill or set of experiences that make them uniquely suited to judge. A decision regarding succession will then be made within five months.”

4. “Succession will occur on XXX 1, 20XX. My son will buy out my equity position from proceeds and earnings of the business at the rate of ___ per month. To protect my future income, the company cannot exceed a debt limit of ___ nor touch a stop loss of ___. In the event either or both of these possibilities occur while I am still majority shareholder, I have the right, if I choose, to reenter the business and assume its leadership.”

5. “After my daughter becomes president, I expect the following: that my office remains my office, that I receive all financial statements either while in town or in Florida, and that each month I receive an informal summary of the progress of the business. I will not make any decisions regarding the operation of the business, but do reserve the right to offer my opinion (solicited or otherwise) to my daughter (but to no one else). She, of course, can accept or reject my advice as she sees fit. Were an agreed-on stop loss to be touched, I reserve the right to reenter the business and to make whatever decisions I feel are appropriate—in effect, to resume the presidency of the firm.”

1. “The following are requirements for family members wishing to join the management of the business:

a. An evaluation process, including a psychological management assessment.

b. An engineering or business degree; this requirement can be satisfied if

I. during the course of employment, the family member takes those courses in engineering and business deemed necessary for moving into management,

II. or the family member has prior business experience.

c. A training program that includes ‘some plant work.’

d. Discussion of a career path decided by the family but with the guidance of others (e.g., human resource personnel, consultants).

e. A decision-making process determining whether the relative should initially work outside the business.

f. Any exceptions will require a written justification approved by the Ownership Committee.”

2. “In the event of a family member wanting to enter the business but finding no available position, the family member would be invited into the firm, but not necessarily in his or her area of specialization or interest.”

3. “Ownership of the Smith Company will be retained by the direct descendants of Mary and Joe Smith. This effectively excludes in-laws from owning stock.”

4. “Equity in the firm will be held only by those individuals actually operating the business. Nonworking family members will receive financial benefits equivalent to the value of the business at the time succession is officially and formally announced.”

5. “Assuming that the three children, under the presidency of Amy, meet goals for ___ number of years, Tom has agreed to give them ownership of the company (as opposed to them buying the company, etc.). He has also agreed that the following decisions will be made by June 1, 20__:

a. That clear and specific goals (financial, organization, etc.) by which the siblings’ performance will be measured need to be set up

b. That Tom will be checking with his lawyer and accountant about how to best set this program up (not the goals but rather the legal aspects)

c. That Tom will be investigating how much money he will want to draw out of the company as compensation after business ownership is transferred

d. That Tom will decide in three weeks from today how long this transition process will take (i.e., the transition of ownership)”

6. “A distinction has to be made between ownership, management, and beneficiary status. Dad has expressed his desire that only working family members be owners, that it be their decision as managers as to whether and whom to include in the business (e.g., in-laws), and that family members (even though neither owner nor manager) will still benefit financially and equitably from his past efforts.”

7. “Dad expressed the preference that neither in-laws nor children of those family members outside the business be invited into the business except in unusual cases. However, the actual decision rests with Paul. In general, then, the odds are that only Paul’s children will have the opportunity to become part of the family business.”

8. “Mom expressed the wish that each of the offspring have a prenuptial agreement, a living trust, or other testamentary or inter vivos trust prior to marriage.”

9. “Were Susan to enter the business at some future date, she would not have ‘voting’ power in business matters for 5 years.”

10. “Since Alan will be running the business in the future, Dad would want him to eventually own 100% of the firm. The corporation will purchase his sisters’ 20% and Dad will retain his 70%. Mom will inherit Dad’s shares. The corporation will redeem the shares from each sister for $___ during May or June of this year.”

11. “A legal document will be drawn up to protect Steve were a potential threat to his 100% ownership goal to emerge while he is still short of that. An example of this would be Mom’s wanting to marry again and her future husband wanting to enter the business. This legal document will be completed by September of this year.”

1. “There will be a board of directors throughout the lifetime of the business and while it is in the hands of family members. Nonfamily members will outnumber family members by at least two directorships, the total number of directors numbering at least six. The nonfamily directors must be successful business owners in their own right, chosen because of a particular set of skills or experiences that can help the firm. There are to be no consultants (lawyers, accountants, bankers, management consultants, etc.) on the board, though, of course, their assistance will be sought as needed. The family members on the board will be limited to those who are working in the business and have equity.”

2. “The key management succession plan includes the following elements:

a. The strategic planning retreat, which will be held on _____, will focus on the skill sets and personnel our future will require.

b. We will review the training and experience of all key management personnel by ___ and report back to the management team soon thereafter. This will also include anonymous 360-degree feedback for each manager from his or her peers, direct reports, and the new president. As a team we will discuss this data and make plans for whatever changes are indicated. These changes might reflect management’s ages (and possible retirement plans), the skill sets we bring to the table, the skills that the future of our firm will demand, a decision regarding whether our current talent pool is sufficient to meet these requirements or whether we have to go outside to do so, how well we work together, and so on.

c. By the succession plan will include planning and training programs for all employees in the firm.”

1. “This succession plan will be reviewed once every two years during the month of January. Present at the meeting will be the entire team of senior managers, family members (both those working in the business and those not), and their spouses. Each person should come prepared to offer whatever changes to the succession plan they deem important.”