Gibraltar Private Bank & Trust Explains How to Find Success in Family Business Succession

Top Quote Gibraltar Private Bank & Trust has identified three of the most common causes of failure for family businesses and offers the following suggestions for overcoming these issues. End Quote
  • Miami, FL (1888PressRelease) October 06, 2011 - Recent statistics show that only one third of U.S. family businesses make it to the second generation because of the challenges that come with navigating the dynamics that exist among a family.

    Through its years of experience in providing counsel to family businesses throughout the U.S., Gibraltar Private Bank & Trust ( has identified three of the most common causes of failure and offers the following suggestions for overcoming these issues.

    1 • Family discord: Open communication is the backbone of preventing family discord. Early on in the creation of a family business, there are important practices that need to be implemented and habitually repeated throughout the life of the business:
    - Discuss family business around the dinner table.
    - Conduct regular family meetings and give a voice to all family owners and
    beneficiaries. Use an agenda and make sure the schedule enables everyone to attend.
    - Adopt a formal, written process for airing and settling disagreements.
    - Outline what is expected of each family member and promote accountability by including consequences for unsatisfactory performance.
    - Find the right people for the right jobs. Desire and ability need to be carefully weighed. Finding the family member who has the required skills and a passion for the business is preferable to simply putting the traditional oldest child in the leadership role.
    - Bring the potential successor family members into the business early. Help them become competent through hands-on experience and set the stage so that others can expect and respect the future leadership.

    2 • Poor planning: As they say, "fail to plan…plan to fail". To beat the odds of failure, create a written plan and review it annually to address these and other issues:
    - Transition and succession strategies (including timing and estate planning)
    - Methods for selection, compensation, and oversight of management
    - Clarification of roles for active and passive owners and a process to allocate and distribute profits to both
    - Tax implications of alternative legal structures such as trusts, endowments or estates.
    - Restrictions, limitations, rights and privileges of ownership (including pre-nuptial and buy-sell agreements to mitigate the risks of divorce)
    - Communication systems and requirements
    - Exit strategies

    3 • Taxes: Benjamin Franklin said, "... but in this world nothing can be said to be certain, except death and taxes." Even if the founder of a small family business does everything else right, a business can fail at his or her death because of tax complications.
    Tax issues that should be considered include:
    - Using life insurance to provide liquidity for dividing an estate between the family members who are active in the business and those who are not. This helps to create a degree of financial equalization, permitting those in the business to retain ownership and control where giving those not actively involved the ability to receive their fair share of the estate.
    - Using asset transfer strategies that "freeze" the company's value early on in the life cycle of the family business and minimize tax liability across successive generations.
    - Transitioning a family business to the next generation is fraught with challenges, but with open communication and proper planning, families are more likely to find "success" in family business succession.
    Last but not least, dynasty families should surround themselves with competent, experienced professionals such as an active Board of Directors, attorneys, CPAs and a financial institution who can provide valuable input into their family business plans.

    About Gibraltar Private Bank & Trust
    Established in 1994, Gibraltar Private ( is an integrated private banking and wealth management company dedicated to enhancing the wealth and well-being of its clients and their families. Gibraltar Private offers residential and commercial lending, private banking and wealth management services to professionals, corporate executives, entrepreneurs, affluent retirees, and select businesses. Gibraltar Private has eight full-service banking offices with its headquarters in Coral Gables, offices in Fort Lauderdale, Miami, Miami Beach, South Miami, Naples, Ocean Reef and New York, and a loan production office in Aspen, Colorado.

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