December 15, 2019

What’s Left After a Family Business Is Sold?

“You’re not going to earn double digits across a portfolio the way you could with owning a business,” he said.

Mr. Brooks was one of 10 family members who owned the majority of Malt-O-Meal. He said he expected his children to withdraw no more than 1 percent a year of his share — still a large amount of money — so that the assets could continue to grow the way his family’s business did. But advisers say this strategy can be problematic for future generations.

“It’s really hard to have one generation exert these from-the-grave controls that will govern possibly unborn generations to come,” said Covie Edwards-Pitt, chief wealth strategist at Ballentine Partners. “It’s somewhat impractical.”

An approach like this, she said, also misses the importance of talking about family values. “People tend to think the answer is in the money when usually it’s not,” she said.

But agreeing on family values takes time. William Deary, who quit his job in publishing to help his wife, Cherilyn, start a home health care company, said they had made sure that their child, Kylyn, saw what they were doing.

Over 23 years, the family created Great Lakes Caring Home Health and Hospice, a company with more than 9,000 employees around the Midwest. Mr. Deary said his family received three private equity investments over a decade, allowing them to diversify their wealth gradually by the time they ceded control of the company in 2017.

But years before the sale, the family had been formulating a plan for its wealth that focused on family values but also held the members accountable. A family scorecard, for example, tracks their progress on 40 items that the family has deemed important, including working hard, investing wisely and the protecting its legacy.

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