Choosing an Executor and Trustee with a Family Business

Choosing an Executor and Trustee UMass
with a Family Business

by Kevin M. Flatley
Director, Estate Planning
The Private Bank at Bank of Boston

For over twenty-five years, I have been involved in settling estate planning issues with Bank of Boston clients who own a family business.Over this time I have seen a dramatic change in the way clients choose an executor and trustee.

Early in my career, lawyers and other trusted family advisors routinely suggested a bank trustee, and it was usually a wise choice.The bank settled competing family claims to the business and other assets; advised the family of the future course of the trust; and invested the trust wisely.The bank also accounted to the state and federal tax authorities and the probate court, if necessary.Everything was done in one location, and a most disruptive time in life became somewhat settled.

In the past ten years, though, lawyers and other advisors came to realize that with a bank trustee, “control” passed to the bank, and other advisors were forced into the sidelines.Aware if this, the lawyer as trustee stepped forward.This trend toward lawyers as trustees in itself is not unsettling as some of Boston’s large law firms have been managing trusts for almost as long as some of the “younger” Boston banks. More…

Selling Your Company With Minimal Capital Gains

Selling Your Company With Minimal Capital GainsUMass

Related Matters Newsletter
Winter 1996

by Kevin M. Flatley, Esq.
Private Bank at Bank of Boston

Some years ago, two brothers came to my office intent upon selling their business. They each were to receive $1 million and were prepared to pay what today would be a 28 percent federal capital gains tax including better than a ten percent capital gains tax to the Commonwealth of Massachusetts. This meant a $300,000 tax payment from each of them.

Instead of paying this tax, they simply sold all their corporate assets and the buyer also bought their corporate name. This left them with a “personal holding company,” the remains of their old company, but with a new name. The personal holding company held nothing but cash.

Our first reaction is that this is no bargain for these individuals; they will be taxed twice on their income, once at the corporate level and a second time as the income is paid to them as dividends. Further, we assume that eventually someone is going to pay the capital gains tax. Our two brothers, however, never paid taxes on their income at the corporate level; and when they died some years ago, the death resulted in the forgiveness of all capital gains. The reason is that the brothers took advantage of two major benefits of the tax law. More…