These slides were used in presentations to The American Institute of Certified Financial Accountants’ National Real Estate Conference and other national presentations (Please do not circulate without the presenter's permission.) David Gage, Ph.D., BMC Associates and Olivia Boyce Abel, Family Lands Consulting Family Lands, Family Dynamics AICPA ISO 9001 Certified

Imagine This… You own real property It has increased significantly in value You have three potential heirs © BMC Associates, 2008

…What Would You Do? You own real property It has increased significantly in value You have three potential heirs Is There More You Need To Know? © BMC Associates, 2008

MargaretTom Case Study: An Entrepreneur Starts a Real Estate Development Company in the Midwest (Yellow symbolizes working in the company) © BMC Associates, 2008

MargaretTom As the Company Grows, Partners Co-Own The Properties along with Tom & Margaret (A red outline symbolizes co- ownership in the properties) © BMC Associates, 2008

MargaretTom Tom and Margaret’s Family Grows, and So Does Co-Ownership in the Properties MollyStevenLarryMichael © BMC Associates, 2008

MargaretTom Michael Begins Working in the Development Company after College MollyStevenLarryMichael © BMC Associates, 2008

MargaretTom Tom Makes Michael Executor of their Estate and Trustee of the Children’s Trust MollyStevenLarryMichael © BMC Associates, 2008

MargaretTom As Tom Nears Retirement, Larry Joins the Company--15 Years after Michael MollyStevenLarryMichael © BMC Associates, 2008

MargaretTom Conflict Erupts within Months Between the Brothers Who Had Been Reasonably Close MollyStevenLarryMichael © BMC Associates, 2008

Margaret The Conflict Quickly Spreads Throughout the Family MollyStevenLarryMichael Tom © BMC Associates, 2008

Margaret The Conflict Eventually Affects The Others in the R.E. Partnerships MollyStevenLarryMichael Tom © BMC Associates, 2008

When Conflicts Erupt Inside Family Businesses, Family Members’ Options Rapidly Diminish © BMC Associates, 2008 Mediation Waste Basket

Issues that Need To Be Addressed In Intergenerational Transfers Of Real Property or Businesses Personal Styles and Values Fairness and Family Dynamics Communication Ownership Financial Management and Governance Vision © BMC Associates, 2008

Changing Siblings’ Relationships: “Accidental Partners” Some parents believe that if it’s their real property, or their business, then it’s their right to determine their children’s partnerships Many parents do not appreciate the complexity of partner relationships Many siblings, too, are naïve about the challenges of being partners © BMC Associates, 2008

In This Case, There Were Multiple “Mediation” Attempts To Try To Resolve the Conflict Tom’s estate planning attorney tried to mediate an agreement Molly and Steven intervened to try to fix what seemed to be wrong with their brothers’ agreement The family agreed to a 3-day family mediation retreat with professional mediators © BMC Associates, 2008

How To Make It Safer for Parents Who Want To Turn Their Children into Partners Siblings have to give their “informed consent” Siblings should demonstrate that they are capable of working together Siblings need to document how they would propose to work together © BMC Associates, 2008

The Outcome of the Family Mediation Retreat Two additional retreats were scheduled: A Partnership Charter retreat for the brothers An estate-planning retreat for the whole family © BMC Associates, 2008

A Partnership Charter I. Business Issues II. Relationship Issues III. The Future © BMC Associates, 2008

A Partnership Charter I. Business Issues 1. Vision 2. Ownership 3. Money 4. Roles & Authority 5. Governance II. Relationship Issues 1. Personal Styles 2. Personal Values 3. Expectations 4. Fairness III. The Future 1. Scenario Planning 2. Conflict Prevention © BMC Associates, 2008

The Outcome of the Family Mediation Retreat Two additional retreats were scheduled: A Partnership Charter retreat for the brothers An estate-planning retreat for the whole family © BMC Associates, 2008

Key Characteristics of Collaborative Family Estate Planning The approach is based on openness, mutual respect and collaboration Parents involve grown children in discussions but always retain the final say in their decisions Individual and joint meetings are used by mediators Parents share what they learn with their estate and business advisors

Family-Shared Real Estate Shared commercial and vacation properties are family businesses, but there are differences Family members develop a sense of place and emotional attachments to vacation properties Family lands/homes create opportunities for a positive legacy and a family gathering place Family lands can be passed on successfully © BMC Associates, 2008

Conclusions Once adult children are old enough, parents should include them in the estate-planning process Clear, direct and open communication regarding the parents’ estate plan is essential It’s wise to begin educating kids when they are young Thorough plans for co-ownership allow siblings to stay peacefully involved, or opt out gracefully © BMC Associates, 2008

Resources Add Vacation Properties Article… and change dates on footer on other slides “Successor Partners: Gifting or Transferring a Business or Real Property to the Next Generation,” American College of Trust & Estate Counsels Journal, Gage, Gromala & Kopf, “When To Use Facilitation and/or Mediation In Estate & Wealth Transfer Planning,” Olivia Boyce Abel, Family Office Exchange, Vol 9 (35), “Holistic Estate Planning and Integrating Mediation into the EP Process,” Real Property Probate & Trust Journal, Gage, Gromala & Kopf, “Estate Planning as a Family: A Collaborative Approach,” Publication of the National Center for Family Philanthropy:, Gage, The Partnership Charter: How To Start Out Right with Your New Business Partnership (Or Fix the One You're In), Gage, © BMC Associates, 2014