SPRING 2015

FAMILYBUSINESSMassachusetts

Off ic ia l magaz ine of the

Inside: The Martin Twins Are In It Together

WE HAVE

ISSUES It’s Larger Than Legal

JOIN US FOR THE 2015 NEW ENGLAND FAMILY BUSINESS CONFERENCE The challenges of mixing family and business creates a unique set of

complexities that other businesses simply do not encounter. You’re not alone.

The New England Family Business Conference was created as a central forum

for family businesses to come together to celebrate their successes and to

help each other navigate common

challenges.

Come join our growing community of

family businesses at the 3rd Annual

New England Family Business

Conference on June 18 at Babson

College in Wellesley, Massachusetts.

The New England Family Business

Conference is gaining momentum as

the #1 networking and educational

event specifically designed for the region’s family-owned businesses to come

together to share experiences, learn from experts, and celebrate the spirit of

family business!

Presented by

Contact The Warren Group for a customized marketing program unique to your business needs. Call 617-896-5307 or email familybiz@thewarrengroup.com today!

CONFERENCE HIGHLIGHTS INCLUDE:

• Hear from industry experts and experienced family business owners.

• Expand your network and learn from peers.

• Choose which breakout sessions you want to attend.

• Enjoy breakfast and lunch with other conference attendees.

• Outstanding Women of Family Business Awards

• Receive a complimentary subscription to the Massachusetts Family Business magazine.

• Enter to win a Business Profile in an upcoming issue of the magazine.

• Enter to win the Grand Prize raffle while at the event.

• Only family business professionals can purchase tickets; service provider attendance is limited to a select number of sponsors.

WHEN:June 18, 2015

WHERE:Babson College

VISIT WWW.NEFBC.COM FOR MORE INFORMATION!

SPONSORSHIP OPPORTUNITIES

ARE AVAILABLE CALL TODAY!

124

5

Massachusetts Family Business

Official magazine of the CONTENTS

8

4 from the board Will You Be At The Third Annual New England Family Business Conference?

5 business profile: TECH Advisors From Taxes To IT, The Martin Twins Are In It Together

6 discrimination accusation The Next Steps To Take After You Receive An MCAD Complaint

12 all in the family Transferring Real Estate To Heirs May Require Uncomfortable Conversations

8FACING MORE THAN LEGAL ISSUESWhen confronted with adversity, legal documents can only take a family business so far.

JOIN US FOR THE 2015 NEW ENGLAND FAMILY BUSINESS CONFERENCE The challenges of mixing family and business creates a unique set of

complexities that other businesses simply do not encounter. You’re not alone.

The New England Family Business Conference was created as a central forum

for family businesses to come together to celebrate their successes and to

help each other navigate common

challenges.

Come join our growing community of

family businesses at the 3rd Annual

New England Family Business

Conference on June 18 at Babson

College in Wellesley, Massachusetts.

The New England Family Business

Conference is gaining momentum as

the #1 networking and educational

event specifically designed for the region’s family-owned businesses to come

together to share experiences, learn from experts, and celebrate the spirit of

family business!

Presented by

Contact The Warren Group for a customized marketing program unique to your business needs. Call 617-896-5307 or email familybiz@thewarrengroup.com today!

CONFERENCE HIGHLIGHTS INCLUDE:

• Hear from industry experts and experienced family business owners.

• Expand your network and learn from peers.

• Choose which breakout sessions you want to attend.

• Enjoy breakfast and lunch with other conference attendees.

• Outstanding Women of Family Business Awards

• Receive a complimentary subscription to the Massachusetts Family Business magazine.

• Enter to win a Business Profile in an upcoming issue of the magazine.

• Enter to win the Grand Prize raffle while at the event.

• Only family business professionals can purchase tickets; service provider attendance is limited to a select number of sponsors.

WHEN:June 18, 2015

WHERE:Babson College

VISIT WWW.NEFBC.COM FOR MORE INFORMATION!

SPONSORSHIP OPPORTUNITIES

ARE AVAILABLE CALL TODAY!

4

Running a family business can fre-quently be like herding cats, with everybody charging off in different

directions. But when it all comes together and family members are focused on mov-ing forward together, there is little that can stop your progress.

That’s the way we feel as we approach our third annual New England Family Business Conference, which will be held on Thursday, June 18, at the Babson Ex-ecutive Conference Center, on the campus of Babson College in Wellesley, Mass.

When the Family Business Association first joined forces with The Warren Group to organize the initial New England Fam-ily Business Conference in 2013, the task seemed overwhelming. Choosing a date, selecting the site, inviting speakers, coor-dinating schedules, promoting the event – the “to-do” list seemed endless. But it all came together, and more importantly, the feedback we received from the family busi-nesses members who traveled to Foxwoods was universally positive. They all walked away with deeper insights and useful in-formation. Hearing from and sharing with fellow family business owners was also re-assuring and reaffirming.

Building on the 2013 success, we had

even greater success at The International Golf Club in Bolton, Mass. The 2014 con-ference, which kicked off with our first Outstanding Women of Family Business award ceremony, had standing-room-only breakout sessions and inspiring and enter-taining keynote speakers.

The prestigious Executive Conference Center at Babson College is the site of the 2015 New England Family Business Conference and is an ideal setting for an expanded roster of speakers and additional breakout sessions that deal with the most important issues and challenges facing family businesses today.

If you have participated in the New England Family Business Conference in the past, I don’t have to sell you on the ben-efits of attending. If you have not yet been a part of the action I urge you to set aside June 18, 2015. Register now for this year’s event at www.nefbc.com. I guarantee you’ll return to work refreshed and enthusastic, armed with new and valuable ideas on how to herd the cats in your own family busi-ness. ■

ED TARLOW

PRESIDENT

FAMILY BUSINESS ASSOCIATION

Will You Be at the Foremost Event for Family Businesses?

Letter from the President

DIRECTORSJeffrey S. Davis, Mage, LLCAl DeNapoli, Tarlow, Breed, Hart & Rodgers, P.C.Brian Nagle, First Republic Private Wealth Management

101 Huntington Ave., Suite 500Boston, MA 02199fbaedu.com

FAMILYBUSINESSMassachusetts

Official magazine of the Family Business Association. Inc. Editorial | Advertising | Design

A Family-Owned Business Since 1872

280 Summer Street, Boston, MA 02210Phone 617-428-5100 Fax 617-428-5119

www.thewarrengroup.com

PRESIDENTEdward D. Tarlow, Tarlow, Breed, Hart & Rodgers, P.C.

VICE PRESIDENTCatherine Watson, Tarlow, Breed, Hart & Rodgers, P.C.

TREASURERRichard A. Hirschen, Gray, Gray & Gray, LLP

©2015 The Warren Group Inc. All rights reserved. The

Warren Group is a trademark of The Warren Group Inc. No

part of this publication may be reproduced in any form or by

any means, electronic or mechanical, including photocopying,

recording, or by any information storage and retrieval system,

without written permission from the publisher.

5

Business Profile

It’s a commonly held belief that twins share a very special bond that begins before birth. In 2011, researchers at

Umberto Castiello at the University of Pa-dova in Italy confirmed this notion when they found that twins actually do interact in the womb, making distinct gestures toward each other. Konrad and Kevin Martin, al-though somewhat different in personality and physical appearance, epitomize that unique connection, both personally and professionally.

Their story begins in Bangor, Maine, where they are the youngest of five boys. A composite of both parents, they embody some of their father’s creativity. (A com-mercial artist by trade, he also designed the state’s Paul Bunyan statue and painted por-traits of several senators and congressman.) Their mother deserves credit for the twins’ fiscal acuity, having worked as the official bookkeeper for her husband’s business.

From the time they were young, the boys were pretty much inseparable, participating in the same athletic activities, with an af-finity for water sports. Kevin was an All-American in diving, harboring aspirations of an Olympic bid until a stress fracture shattered those dreams. Konrad also flour-ished in the water and became a competi-tive swimmer, entering and winning races across New England.

Away from the pool, the Martins deliv-ered newspapers and worked in restaurants together. Even in college, they pursued the same major, graduating from the Univer-sity of Maine with degrees in accounting and subsequently becoming certified public accountants. For a time they both worked at The JD Martin CPA firm, which their older brother John owns.

But it appeared that the ties would be broken when Konrad accepted a position with Abrams, Little-Gill, Loberfeld PC and moved from Maine to Massachusetts. “I thought we were done working togeth-er,” Konrad said. But fate intervened.

The Reunion

Shortly after Konrad joined the Chest-nut Hill firm, one of its computers mal-functioned. The partners asked Konrad to investigate and he quickly fixed the issue. The computer situation prompted the firm’s partners to consider opening an

information technology (IT) specialty as a second profit center to help clients and other CPA firms.

When the firm asked Konrad to head up this center, he demurred, since he did not want to surrender his CPA role, but suggested hiring his twin brother instead.

Kevin readily accepted the position, maintaining his role as CPA, supplement-ed by the IT specialist position. In 2002, Abrams, Little-Gill, Loberfeld established

techKnowledge Advisors LLC as a “firm within a firm,” making the Martin broth-ers part owners of the new entity. During the next three years, the business grew and the Martins transitioned from their CPA roles to IT professionals. In 2005, when the firm decided to return to its original

mission and shed the new business, the duo brought in a minority partner and ac-quired the tech firm, which they renamed TECH Advisors.

Like any business in the early stages, TECH Advisors weathered some minor storms. Konrad noted that it takes a few years to get any business off the ground. “We got over some initial hurdles and are at cruising altitude now. We’ve seen more

By Phyllis Hanlon

A Business Built from BirthThe Martin Twins Take Togetherness to a New Level

Kevin (left) and Konrad Martin.

Continued on page 14

“We do have our ups and downs, but as it comes together, it’s exciting. It’s like playing

sports. You attack and you win.” — Konrad Martin

6

Imagine you arrive for work one morn-ing and sitting on your desk is an en-velope from the Massachusetts Com-

mission Against Discrimination (MCAD). Inside is a complaint by a former employ-ee, alleging discrimination and harass-ment against the company that you and your family have worked so hard to make successful. Not only are you in disbelief about the substance of the claims, but you are in a panic because you have no idea what is involved in defending an MCAD complaint.

While the MCAD’s website provides gen-eral guidance about the process, many of the questions employers have when faced with a complaint can only be answered by those who have been through the

process many times. To help answer these questions, the following is a step-by-step guide about the MCAD process, includ-

ing what employers should know and ex-pect at each stage.

After a complaint is filed, the MCAD sends the employer (also referred to as the “respondent”) a copy of the complaint and an initial letter stating that a written answer, called a “position statement,” is due within 21 days – meaning 21 calendar days, not business days. This time frame is often insufficient for the respondent to fully investigate and respond to the charg-es, or to retain and allow counsel to do so

on its behalf. If more time is needed, em-ployers should not panic, as extensions of up to 21 days are generally allowed.

The initial letter may also provide the date of the investigative conference, typi-cally scheduled three to six months from the date of the letter. The MCAD is strict

about the date and will only allow it to be rescheduled upon a written request to the investigator for good cause, no later than 14 days before the conference. At least one representative of the employer is ex-pected to attend, even if the employer is represented by counsel.

Position statements must be signed under the pains and penalties of perjury; however, notarization is not required. Generally, the individual signing off on the position statement should be an of-ficer, director or manager with personal knowledge about the allegations and/or the authority to attest to the facts stated in the position statement.

The original position statement and supporting exhibits must be filed with the MCAD; a complete copy should be for-warded to the employee (also referred to as the “complainant”).

The complainant has the right to file a rebuttal in response to the position state-ment, but is not required to do so. Em-ployers who do not receive a copy of a rebuttal within a couple of months after filing the position statement should con-tact the MCAD to find out the status and obtain a copy of any rebuttal that has been filed.

The respondent may file a sur-reply to address any new allegations or clarify any inaccuracies raised in the rebuttal. There is no deadline for filing a sur-reply, but it is usually good practice to file it before

the investigative conference, if possible, so the investigator has all of the written submissions prior to meeting with the parties.

The investigative conference is a 20-minute proceeding for the investiga-tor to gather evidence, identify disputed

The MCAD process is often confusing and overwhelming, especially for businesses that have

never previously been sued by an employee.

So You’ve Received an MCAD Complaint

A Valuable Guide to What’s Next

By Ariel Sullivan

ARIEL SULLIVAN

7

issues, clarify the parties’ positions and ask specific questions in person about issues and facts relevant to determining whether probable cause exists. The in-vestigator may also request the employ-er to submit additional information and/or documents following the conference.

The investigator may interview and take witness statements from current or former employees as part of the investi-gation process.

After the investigation is completed, the MCAD will issue either a probable cause finding or a lack of probable cause (LOPC) finding as to each claim. There is no timeframe within which the deter-mination must be made. According to the MCAD the “average case comple-tion time” is 18 months; however, it of-ten takes at least two to three years to receive a finding.

If the MCAD issues a LOPC find-ing as to all claims, the case will be dismissed, subject to any appeal by the complainant. If there is no appeal, or if the LOPC is upheld on appeal, the case will be dismissed by the MCAD, and the complainant’s only course of action will be to file a civil action in court within three years from the last discriminatory incident.

If the MCAD reverses a LOPC find-ing or issues a probable cause finding as to any of the complainant’s claims, the parties will then proceed to a con-ciliation conference to attempt to settle the case. It often takes several months to receive a conference date from the MCAD. At the conference, employers should put aside strong personal feel-ings against settlement, balancing the costs of resolution against the defense costs and continued business disruption of an ongoing case.

If a resolution cannot be reached at the conciliation conference, the parties will proceed with post-determination discovery and, eventually – if the case is not subsequently settled – a public hear-ing will be held. In 2013, 55 percent of employment cases that proceeded to a public hearing resulted in decisions in favor of complainants.

At any time during the pendency of the action before the MCAD, the com-plainant may remove and file his/her claims in court, if it is filed within three

years of the last alleged discriminatory action. The MCAD process is often confusing and overwhelming, especially for businesses that have never previous-ly been sued by an employee. Reviewing the above guidance will help employ-ers gain a better understanding of the process so they can make informed and cost-effective business decisions when faced with an MCAD complaint. ■

ARIEL SULLIVAN IS A PARTNER IN THE

MASSACHUSETTS LAW FIRM BOWDITCH & DEWEY.

7

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8

We Have IssuesTrue Nature of Ownership? It’s Larger Than Legal

9

Possession may be nine-tenths of the law, but even lawyers agree that legal representation is only

part of the process of conflict resolution, particularly in family-owned businesses. Legal documents are an essential key-stone to helping a business move on from conflict, or simply transition in calmer situations, but they’re only as good as the parties agreeing to them.

In legal circles, there’s an increasing inclination toward recognizing the value of mediation and oth-er forms of prior dis-cussion as a first step in seeking to resolve and head off disputes that, if unresolved, could cripple or de-stroy a family busi-ness.

The success of any step in this process, even mediation, de-pends on the ability, willingness and pre-paredness of the par-ties involved to come to the negotiating table.

No Escaping Life

Tom Davidow, Ed.D., founder of con-sulting firm Thomas D. Davidow & As-soc. and an advisor to the Family Busi-ness Association (FBA), said that without acknowledgment of family issues, prob-lems only accelerate and become more difficult to address.

“None of us can escape life,” he said – accidents, illness, divorce and death cre-ate a sense of loss that may not be grieved fully. Unresolved issues manifest whether or not family members work together in the business.

If there’s a divorce in the senior gen-eration, the senior generation business owner and the adult child may see a

chance to utilize the business as a vehicle from which to work through unresolved issues. “It can work, but it makes it more difficult,” Davidow said, because if there is an expectation of financial remunera-tion for the adult child to make up for an early-life emotional loss, no amount of money will stanch all ills.

He noted the similarity between the sale of the family homestead (for related article, see page 12) and the transition of the family business.

Business founders may exaggerate the value of the business, much in the same way that people selling their homes may name unrealistic asking prices. “When they decide they want to be bought out, they’re looking for payback for the amount of emotion they have put into the

business and the value they have put into it, so things can get distorted,” Davidow said.

Using best business practices and en-gaging a third-party business evaluator can help make the distinction between perceived and actual value.

Another common situation: Family businesses frequently don’t have share-holder or buy/sell agreements despite the urging of family-business specializing at-torneys. When these documents are cre-ated in less- or non-stressful situations, establishing value, procedures, who can sell to whom and what the exit strategy is, the legal documentation eases the transi-tion, Davidow said.

You Trust Me – Don’t You?Another risk factor in family-owned

business is implied trust: “With trust comes assumptions, and with those as-sumptions come expectations,” Davidow said. Family business leaders may assume that the need for written guidelines sug-gests a lack of trust among family mem-

bers. But when external circumstances collide with individual goals – as when individual members begin to wrestle with what is best for them and their nuclear family, as opposed to the interests of the business and the family of origin – the end result can be a challenge to trust is-sues. Without structures and guidelines, things can spin out of control.

Then there’s the allocation of owner-ship to the next generation, who may not know what they have to do to secure the stake they think they have. “The biggest fear in terms of allocating ownership is the issue of control,” Davidow said. When a business is transferred on a timely basis – that is, at the earliest time possible – the organization will ultimately save on taxes, assuming that the business will grow in

value every year beyond transfer. So how can one maximize the benefits of a timely transfer while addressing the control is-sue?

Many conveyance vehicles exist through which owners can transfer equi-ty while maintaining control – preferred stock, special stock and control stock – which can allow families to transfer up to 90 percent of value out and retain 100 percent of voting stock so they maintain control. Or, they can create limited liabil-ity corporations into which to transfer stock, with the senior generation as the general partner, to maintain control.

But legal structures can’t solve all ills. If the upper-generation and/or control-ling party or parties die without having developed a decision-making process, the succeeding generation may not have un-dergone a training competency regimen to establish their suitability to take over.

Control struggles among succeeding generations constitute one of the most frequent dilemmas of family-owned busi-

By Christina P. O’Neill

“You may have success in court, but have destroyed the family. Words in a document can

only get you so far.” — Al DeNapoli, attorney

Continued on page 10

ED TARLOW

TOM DAVIDOW

AL DENAPOLI

1010

MassachusettsRhode IslandConnecticut

866.356.BLUMblumshapiro.com

One size fits one.At BlumShapiro, your unique goals becomeour goals. We not only see your vision, we help you achieve it.

nesses, Davidow warned. Take the exam-ple of a mother and a father with two or three siblings in the next generation of ownership. The father dies, and the sim-plest tax plan is to give company stock to the spouse in order to delay the tax con-sequence of intergenerational transfer.

The father dies first, leaving the moth-er with the company stock. Sibling ri-

valry ensues among the next generation, and the mother ends up having to choose the successor.

Attorneys dealing with transition is-sues have all the legal tools on hand to make the wheels of the legal and tax system work, but they may be unable to convince their clients to devise training programs for the next generation.

Red on Their HandsAl DeNapoli and Ed Tarlow are at-

torneys at the Boston law firm Tarlow, Breed, Hart & Rodgers PC. Tarlow is a founding member of the law firm and also president and founding member of the FBA from 2008 to the present. De-Napoli is a member of the law firm and also a founding member and executive

director of the FBA. They say that when family-business owners seek help with is-sues that appear to be headed toward liti-gation, the firm works with them to avert the litigation outcome.

“Many family feuds start with an ear-lier generation being insensitive to re-lationships of various family members,” Tarlow said. Examples include putting a

younger sibling in charge of an older sib-ling’s trust, or commingling assets. In or-der to have a proper succession, the fam-ily business needs a good management structure, a good organization structure, and a good governance structure, which can’t occur without sensitivity to family dynamics, Tarlow said.

An exclusively litigatory approach to deep-seated problems may be a Pyrrhic victory, according to Tarlow and De-Napoli. “You may have success in court, but you have destroyed the family,” De-Napoli said. The people involved in in-terpreting the relationship is what solves the problem. The issues that come up in succession planning can be resolved by compromise among the parties involved, without litigation.

Sometimes family members “are will-ing to kill the golden goose for their own satisfaction – red on their hands rather than green in their pockets,” said De-Napoli.

A family-owned business’ legal advi-sor needs to think, early on, and have foresight over the longer time horizon

“Many family feuds start with an earlier generation being insensitive to relationships of

various family members.”— Ed Tarlow, attorney

Continued from page 9

11

Family Business Practice617.218.2000

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Grandpa

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If this is your family tree…

We should be your law firm.

to avoid conflict in future generations. To the extent that family members partici-pate in the legal discussion, the attorney handling the situation should be aware of personalities and the possible negative outcomes as well as the good outcomes, Tarlow said.

The King’s HelperIn the high-profile DeMoulas dispute

(see the fourth-quarter issue of Massachu-setts Family Business), the business could easily have been decimated without the concomitant public outcry on the part of employees.

Tarlow says he advises clients it takes 10 to 15 years to work out a viable suc-cession for the next generation, as they mature and develop the leadership skills needed to take over the family business. Once the senior generation gets to their 60s and 70s, they are running out of time to do all the work necessary.

“They’ve got to be willing to cede con-trol,” he said. But loss of control often ties in with the loss of self-esteem, and an historically-successful senior generation

often has difficulty in its transition from being the king to the king’s helper. They have two choices – they can be disruptive, or be generative in moving the business forward.

Tarlow noted that good organizational management and structures need to be flexible with time as the senior-genera-tion owner ages and the business chang-es, while leadership comes up from the next generation.

“Most business owners, unless they have a second life that’s meaningful, rely heavily on their principal life, which is the family business,” he said. They often try to retain control in their position, by granting a 5 or 10 percent interest in the family business, with a promise of more ownership once they are gone.

But that doesn’t always play out the way it was intended. It’s always impor-tant that the younger generation retain

its own legal representation in ownership issues in family businesses. Additionally, a perennial question posed by attorneys to their family-business clients is whether the client is expecting representation as an individual, or representation on behalf of the family business.

Ultimately, doing the intangible rela-tionship work up front and then translat-ing it into legal documents that will sus-tain the business over time, call on two different skill sets – the first, evaluating the familial relationships in the proper way, which is the province of family busi-ness advisors, and the second, in the legal realm, designing the legal tools to achieve the desired end. ■

CHRISTINA P. O’NEILL IS EDITOR OF CUSTOM

PUBLICATIONS FOR THE WARREN GROUP, PUBLISHER

OF MASSACHUSETTS FAMILY BUSINESS. SHE MAY BE

REACHED AT CONEILL@THEWARRENGROUP.COM.

“The biggest fear in terms of allocating ownership is the issue of control.” — Tom Davidow, family business consultant

12

By Joshua S. Miller

No Place Like Home

It is 2015 and the federal gift tax ex-emption stands at $5.43 million (in-dexed for inflation). For wealthy fam-

ilies, now is the time to take advantage of this tax benefit and make gifts to future generations. One asset to consider gifting is real estate, such as a second home that has been used by the family as the “sum-mer retreat.” Unlike financial assets, such as stocks, a lot of emotion is tied to family property. The first and second genera-tions have fond memories of growing up at the property and want future genera-tions to share in those memories.

In The Big House: A Century in the Life

of an American Summer Home, author George Colt lovingly describes not only his extended, yet close-knit, multi-gen-erational family, but the fixed point to which the family migrates each summer – a large, but fraying, 100-year-old family home on Cape Cod, the long-time cen-ter of the extended family’s universe. He also describes a center whose spokes have drifted away into their own nuclear units, even as the house needs a major infusion of money (and attention) to keep it from falling apart – or falling to the wrecking ball. As Colt describes it, his 42 summers in The Big House were “beloved for the

stability, continuity and predictability I found nowhere else. The Big House felt like home. … I wanted my children to know the feeling.”

When transferring real estate to heirs, it is important to consider a strategy that’s not only tax-efficient but also ensures the family’s long-term harmony. “You can set off emotional landmines in your family if you haven’t created the right strategy to gift real estate,” said Sid Queler, a man-

Avoiding Emotional Landmines When Transferring Family Property

JOSHUA S. MILLER

1313

aging director in the Boston office of At-lantic Trust, a private wealth management firm with $25.9 billion of assets under management. Future generations may grow apart or live in disparate geographic locations. The key is finding a strategy that is as flexible as possible to deal with the differing needs and wants of the fam-ily members. The donor must be aware of all of the considerations in passing on a piece of property to the next generation.

A common strategy is to use a Quali-fied Personal Residence Trust (QPRT), which allows members of one generation to transfer property to a younger gen-eration while still retaining their right to live there for a set period of time. QPRTs take advantage of the current exclusion amount and significantly reduce gift tax-es on the transfer of the property. If the property is owned by two spouses as ten-ants in common, additional tax savings may result from the valuation discounts on the split interest in the property. Its biggest benefit is that parents can transfer their interest in a personal residence, in-cluding a legacy vacation home, to a trust for the benefit of the children, often re-ferred to as a “follow-on trust,” upon the expiration of the QPRT.

The parents may rent the property at fair market rent from the follow-on trust during their lives. If the property appre-ciates in value during the period of the QPRT, the appreciation passes to the trust free of any additional transfer tax. When the trust terminates, the residence becomes the children’s property. Note, however, that if a donor dies during the term of the QPRT, the value of their in-terest will be included in their estate. Also, if a child or the follow-on trust sells the property after the QPRT has terminated, the property will not get a step-up in basis as it would have if the property remained in the hands of the donor on her death. Notwithstanding some potential disad-vantages, the estate tax savings for the

parents can be considerable depending on the value of the home at the end of the QPRT’s term.

Another strategy is to transfer the property into either a limited liability cor-poration or a limited partnership (collec-tively, a “corporate entity”). The parents would make an initial gift of a percent-age of shares to the children and continue to make additional gifts of shares over time. The gifted ownership interests can receive a discounted value to the extent they are a minority interest and for lack of marketability. All discounts should be val-

ued by a qualified appraiser and carefully reviewed with a legal advisor. While the entity exists, the parents could become the tenants and pay rent, which could be used toward upkeep. One of the most at-tractive features of the corporate entity structure is its flexibility. Unlike a trust, which may be difficult to modify, a corpo-rate entity may be modified as necessary by the shareholders or as set forth in the shareholder agreement to provide for any unexpected circumstances a growing fam-ily may encounter.

Once an appropriate real estate gift strategy is put into place, it is also essen-tial to decide on many important opera-tional aspects of holding, maintaining and transferring the property, including, but by no means limited to: • Who will have access to the property

and when.• If family members may bring guests,

how many and for how long.

• If someone may lend or lease their time to other nonfamily members.

• Who is responsible for paying the costs of operating the property and how will it be calculated.

• Who will be responsible for repairs.• Who decides on capital improve-

ments.• How family members exit or termi-

nate their interest in the property (if allowed).

It is important for the parents to com-municate their desires to their children and express why it is so meaningful to keep the home in the family. As a trusted advisor, it is our job to encourage honest and open dialogue and family discussions so that each family member is able to get as many questions addressed as possible.

Whatever the ultimate goal – keeping a family’s “Big House” intact and improved or putting it in the next generation’s hands – recognizing family dynamics and managing your family’s expectations are important parts of the process. If, for example, something starts with Mom and Dad – the lake cottage they’ve lov-ingly maintained over the years – Mom and Dad will be the constant touchstone and reference point. Healthy family dis-cussions that accompany the setup of a QPRT or other tactic may help avoid touchy issues in the future. The hope is to avoid a conversation years down the road in which one sibling says to another, “Not only did you and your friends break Mom’s favorite lamp at the lake house, who said you could rip out the 100-year-old gardenia bushes and put in an herb garden?” ■

JOSHUA S. MILLER, CFP, IS A MANAGING DIRECTOR AND

SENIOR WEALTH STRATEGIST FOR ATLANTIC TRUST. HE

COUNSELS HIGH-NET-WORTH INDIVIDUALS, CORPORATE

EXECUTIVES, CLOSELY HELD BUSINESS OWNERS AND

MULTINATIONALS ON SOPHISTICATED ESTATE PLAN

DESIGNS AND STRATEGIES.

Editor’s Note: In this article on disposition of a family-owned residential property, we found many similarities between the is-sues families face on transfer of residential real estate and the transitional conduct of a family business. There’s the emotional significance of the property and how it influences the stakeholders, and who has access to the property and responsibility for it. The comparisons of home and business maintenance are not as far apart as one would think, and may strike a chord with some readers – particularly families long established with both business and residential endeavors.

The key is finding a strategy that is as flexible as possible to deal with the differing needs and

wants of the family members.

14

than 20 percent growth in the last year. We’ve become well known in the tech space,” he added.

During the last 11 years, the company has expanded from three employees to 12 and revenue has skyrocketed more than 303 percent. The brothers have entirely relinquished all CPA duties and now focus on helping other CPA firms and other companies with their informa-tion technology issues. “We are also go-ing into non-CPA firms to look at their accounting and financial systems – all the things a business needs to work,” said Konrad. “If we understand your compa-ny, we can advise you as to what kind of business solution you need.”

TECH Advisors currently serves ap-proximately 50 CPA firms – five or six of which are 100-member firms. All of their clients benefit from the brothers’ knowl-edge, experience and expertise in and understanding of the accounting field. In total, TECH Advisors has 110 clients. Notably, TECH Advisors is seen as the go-to source within the CPA industry and developed the Written Information Security Policy (WISP) for the Massa-chusetts Society of CPAs (MSCPA).

Some companies struggle to grow their client list, but that has not been an issue for the Martin brothers.

“We want clients to see us as we are – two bright guys that bring the right at-tributes and acumen to the job. The cli-ent knows that we will work with them. We represent fairness, hard work and good business insight,” Konrad said. He compares running the business with his brother to an athletic competition. “It’s fun to get up in the morning and go to work. We do have our ups and downs, but as it comes together, it’s exciting. It’s like playing sports. You attack and you win.”

The Martin brothers attribute their success in part to staying abreast of trends in the industry. They take advan-tage of training opportunities and pur-chase the latest industry software. “We are passionate about helping the busi-ness person concentrate on his chosen profession. We offer great IT services so they can focus on their business. This is our approach to business,” Konrad ex-plained.

Complementary TeamworkWhile the Martin twins share a spe-

cial bond, both in the office and out, they have individual personalities and strengths that complement the other. Kevin, quiet and conservative, brings a more balanced, detail-oriented out-look to the firm. Outgoing, a risk taker and physically bigger, Konrad brings his large personality to the team. He serves as the sales/marketing/public relations figurehead, while Kevin navigates any roadblocks with his sensible, analytic way of approaching an issue.

The twins work together on every as-pect of the business. And as a team, they rely on each other to effectively run the company. While Kevin serves as the head technician, Konrad steers the ship.

“There is a huge amount of trust re-quired in any relationship,” Konrad said. “Ours is built-in from birth and has grown through the years. I’m very proud of the fact that we started a couple of businesses together and have been able to keep them going.”

Although Kevin is the designated “te-chie,” Konrad offers input when it comes to the business’ social media messages and e-newsletters. “Kevin explains what needs to go in our message, and I write the copy. We rely on each other,” he noted.

You might think that siblings working together would face at least a few bumps in the road. But, according to the two-some, personally and professionally they have enjoyed smooth sailing through the years. “We take vacations together, go fishing together. We always just got along so well. Aside from my wife, he is my fa-

vorite person in the world,” said Kevin. “There is no competition between us. We are not argumentative and have no con-flict.”

Konrad added, “Having been on the same swim and football teams, we’ve learned the process of trying to work out any conflicts. We understand each other.”

As for the future, both men agree that growing TECH Advisors is top priority, a goal they intend to strive towards to-gether. ■

Continued from page 5

Konrad and Kevin in their earlier years

“We always just got along so well. …There is no competition between us. We are not

argumentative and have no conflict.” — Kevin Martin

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