By: Andrew Bechel, Esq., LL.M
DISCLAIMER: Greenspoon Marder LLP does not represent any party associated with the ongoing Broncos’ ownership controversy. We do not know what provisions are contained in the documents and this blog post uses publicly available information to illustrate how certain estate planning techniques could have helped prevent the current litigation.
Many significant events have occurred since the publication of the first part of our blog series on the Pat D. Bowlen Trust. Pat Bowlen passed away over the summer, and while there was a lull in the litigation involving Broncos’ ownership after his death, Mr. Bowlen’s oldest daughters have now filed a petition to invalidate the Pat D. Bowlen Trust on the grounds that Mr. Bowlen did not have capacity to execute the documents and was subject to undue influence. The attorneys representing Mr. Bowlen’s interests claim that these capacity issues were only raised after the trustees had notified the eldest daughters that they would not be qualified to run the Broncos.
While this is obviously an unfortunate situation for the Bowlen family, it highlights the importance of working with clients early on to develop a business succession plan, particularly when a valuable small family business is at play. While nobody wants to plan for their eventual death or incapacity, as evidenced by the current Broncos’ saga, families oftentimes will fight over who gets control of such business if a clear plan is not put forth. Additionally, the Bronco’s saga illustrates the importance of engaging in such planning early to ensure that a client’s wishes are ultimately followed after the client’s death or incapacity. In Mr. Bowlen’s case, if his trust is invalidated on capacity grounds due to the onset of Alzheimer’s, his entire plan will be invalidated and his ultimate intentions may not actually be followed.
Since it is important to engage in business succession planning early, it is also important to put together a plan that is flexible and can adapt to changing circumstances. A plan that is too rigid may ultimately give control of a family business to a family member that ultimately does not have the skills and experience to run the business. Thus, the plan should always allow for certain latitude to ensure the family member that is the best qualified to run the business is put in charge of the business even if that family member was not the client’s first choice to do so. From all available information, it appears that Mr. Bowlen’s trust actually did include a fairly flexible plan in that the trustees have discretion in whom to put in charge of the team, but if Mr. Bowlen did not have capacity to execute his trust it is all for naught.
How a business succession plan is implemented for each client will be unique based on the client’s preferences and the nature of the underlying business. However, it is imperative that the estate planner begin working with the client on business succession planning at the same time that the initial estate plan is designed. While focusing on putting together a tax efficient structure is often of paramount concern, in many cases it is just as important, if not more important, to consider the management of family businesses, especially when such businesses make up a significant portion of a client’s wealth. If this is not considered during the initial stages of developing the estate plan, it may be too late to implement the plan by the time the client actually does consider putting a succession plan in place, as may be the unfortunate case for Mr. Bowlen if his trust is invalidated.
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