|A New Law Review Paper Examines The Conflicting Fiduciary Roles In Which Your Business-Owning Clients May Find Themselves|
|Wednesday, August 15, 2012 12:20|
If you have entrepreneurial clients, then it’s also likely that you are working with them on succession plans for their businesses. Many want to transition control of their businesses to a child who has the passion and talent to effectively continue it.
But the structures business owners use to facilitate that transition can create fiduciary conflicts for those taking the reins.
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A typical scenario is to leave the business to the child with the most interest, including a management role. Other children are given ownership interests through trusts and the managing child is positioned as trustee over those interests.
This situation has inherent conflicts because it sets up two fiduciary roles, one as a trustee and another as the fiduciary of a business entity. There are, obviously, times when the interests of one must supersede the other.
If the manager child uses the less strict guidelines of a business entity fiduciary to reduce the value of the trusts’ interests in the business, the beneficiaries of the trustee may be disadvantaged.
A paper has been written in the Houston Law Review that examines various fiduciary roles for the specific purpose of helping family members who find themselves in such a duality of responsibility.
The paper will shed some light on how you can better support your family clients who serve in a fiduciary capacity. Many of them rely on your guidance in the fulfillment of that role.
This paper particularly examines the possibility of a hybrid type of fiduciary role which could more effectively balance the risks inherent in managing a business with the vulnerabilities of trust beneficiaries.
You can access the abstract of the paper here. There’s also an option on that page to download the entire research piece.