A Family Affair Handing down a family-owned enterprise demands more than a well-crafted will

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In the late 1950s, Alton Bell was one of Maine’s more worldly farmers. An electrical engineer graduated from the University of Maine, he was a right fielder for the Red Sox and a paratrooper in Europe during World War II. He arrived home in Edmunds in 1957 to find his family’s 200-year-old farm, once a sprawling, 1,600-acre homestead along Cobscook Bay, slipping away.

Ownership of the property had been scattered when Alton’s grandfather died without leaving a will in 1941. The young Bell began farming his father’s parcel and negotiating with eight aunts and uncles to buy or barter back the original acreage. With his wife, Helen, two sons and two daughters, he succeeded in reconstituting the original farm and expanding its dairy and timber businesses. Years later, however, when it came time to write his own will, Alton resisted. By the late 1970s the rescued property was once again at risk.

“My parents were in poor health and there was the threat of estate taxes coming over us,” said Alton’s oldest son, Terry. “When everyone realized the farm could be lost on the death of my parents, then that’s when we decided that something had to be done.”

Nine in ten businesses and essentially all working farms in Maine are family-owned. Nationwide, ownership will change hands in 39 percent of all family-owned businesses in the next five years, according to a 2003 survey by the Mass Mutual Financial Group.

Many of those families see federal estate taxes as their most challenging obstacle, currently threatening to gobble up 40 percent or more of businesses or estates valued at more than $1.5 million (that threshold is scheduled to increase in increments through 2010). State taxes potentially take another bite, in Maine kicking in at the $850,000 mark.

But if managed correctly those so-called death taxes are largely – often entirely – avoidable. More difficult is the search for common ground between siblings and generations on which such arrangements depend.

For parents, it can mean a harsh reminder of mortality and a relinquishing of control over a business and financial security. For children and grandchildren, it may require a brutal adjustment in their expectations and visions for the future. Lawyers and accountants often become well-paid mediators for family debates.

And, as those debates dig in, assumptions all around give way to an understanding that the family business runs deeper than either generation had realized.

“Ultimately, it is all about the relationships,” said Bob Keteyian, a family and business counselor in Ellsworth. “If you don’t understand the nature of the relationships, the complexity of them and where the strengths and weaknesses are, it doesn’t matter what [contracts and agreements] you put in place structurally, nothing is really going to be successful.”

Southwest Harbor

Amy Young and her father, Pete Dolliver, began to explore the idea of passing on a family business five years ago. Dolliver had founded his fine gardening operation, Deer Meadow, in Southwest Harbor in 1976. Young had grown up working with her father from time to time but with little thought of joining him in the business.

Then, in 1999, Deer Meadow lost its office manager. Dolliver needed help and Young, then a 39-year-old graphic designer with a widely mixed bag of work experience, began to see through new eyes.

“I felt the business was something I understood and something where I could put some effort into the future, my future,” she said. “I also felt it could be an incredibly lucrative business if it could be straightened out and run a little differently.”

She pitched the idea of an ownership transition plan to her father. He had considered having someone take over eventually but had assumed the new boss would have a background in horticulture. He nevertheless thought they should give the plan a go. The pair agreed to a five-year period during which they would work to reshape Deer Meadow around something other than the founder’s energy and expertise.

Young immediately began straightening out problems, organizing the bookkeeping, billing and management of company debt. But when she began nudging into new territories: a Web site, marketing plans and safety programs to help cut insurance costs, friction developed.

“We ran into some difficulties,” said Dolliver, a former Air Force fighter pilot who flew in Vietnam and then as a commercial pilot for Pan Am until 1976.

To his daughter, those difficulties hinged on her father’s lack of trust in her abilities and of respect for her vision for the business. For Dolliver, the problem was primarily one of having entered the transition process late in the game. A man who had pieced his business together in intricate steps over many years, and whose heart and life were deeply bound up in his work, he felt the five-year plan was simply moving too fast.

“In other words, I wasn’t able to turn the reins over to her fast enough,” he said.

It was not uncommon ground. Family businesses nearing a leap between generations must often make jibe contrasting management styles and expectations for how quickly change should or should not occur. The younger generation is often more bold, having less at risk and more years ahead of them in which to recover from setbacks. The older generation has often built an entrepreneurial business: intuitively managed and with many particulars kept in their heads. Maturing such a business to a more transferable management model is a delicate proposition.

“If you look at the temperament, character, personality of people who start, grow and develop the business and that of a manager, someone who maintains and nurtures the business, they can be very different. That alone can be very difficult,” said George Elias, a counselor who is Keteyian’s partner and owner of the Rooster Brother store in Ellsworth.

Keteyian and Elias also agree there are times when character contrasts generate energy – a kind of gritty intensity that can kick a business up a notch. The solution for Young and Dolliver, however – at least for the time being – was to back away from any sort of transition plan. Now 69 years old, Dolliver plans to halve the size of the business next year, to focus more on his vegetable garden and to steer toward a less frenetic lifestyle.

Young spent a year away from Deer Meadow and started her own business, handling deadline-based bookkeeping projects for area accountants. Today she also manages the Deer Meadow office part time but has let go of the idea of making the business her own.

“I finally came to the conclusion that I don’t need to do this,” she said. “What I need is to have a relationship with my father that we both enjoy.”

Milbridge

Jason Pinkham is a 25-year-old financial services adviser whose grandfather launched the H.F. Pinkham Inc. lumberyard in Milbridge in 1966. His parents, David and Rhonda, lived and breathed the business through his lifetime, building it to more than $8 million in annual sales. The Pinkhams sold the operation in October, but only after Jason – working for Morgan Stanley Dean Witter & Co. in Naples, Fla. – made a final decision not to carry on the family trade. Pinkham said the issue was anything but black-and-white.

“When you have something in your family that long, you don’t necessarily look at it from a business standpoint,” he said. “You don’t look at in terms of making money or how much it’s worth, you look at it more from an emotional standpoint.”

David had made the business available to his son on the same basis it had been handed from his father to him. “He wouldn’t have had to pay anything,” David said.

But both Rhonda and David also saw their children succeeding beyond Washington County. Their 26-year-old daughter, Dawn, is a branch manager with Sovereign Bank in Saugus, Mass. Jason had earned an economics degree from Bates College in 2002 and was quickly making strides in his career.

The building products business can be harsh and demands 100 percent commitment, David said, and he knew his children’s hearts were elsewhere.

“We didn’t want to put any pressure on them to come back and take this business over,” he said. “Because if you don’t love it, if you don’t have a passion for it, you are not going to be successful in it.”

Bought by Falmouth residents and investors Chris and Karee Rhoades, the H.F. Pinkham business was delivered into capable hands. Even so, Jason said losing what had been the hub of the family’s income, jobs, friends and ties to the community through his entire life was tough to swallow.

“It’s pretty shocking to have that taken away. Emotionally, you can’t really prepare yourself for it,” he said. “You just kind of take a step back and deal with the emotional stuff. Then you look at it rationally.”

It became clear only after the sale, Pinkham said, just how much of his parents’ time and attention the lumberyard had occupied. The family is now looking into development projects, possibly in Florida, that would partner the parents’ construction expertise and the children’s financial skills. Both generations say the emphasis now leans more to the family side of family business as they enter this new phase.

“We can look to get into other business ventures, where it is just me and my father or mother,” Jason said. “But it is going to be more on a one-on-one, quality-time basis.”

Edmunds

By the 1970s, Alton Bell’s health was faltering. His sons, Terry and Bob, had every intention of carrying on the family enterprise. If their parents died without a will or an estate plan, the brothers and their two sisters would be forced to sell in order to pay the quarter of a million dollars in inheritance tax.

Alton and Helen nevertheless dragged their feet on drawing up a will. Not eager to face the fact of their own mortality, they also hoped to find a fair arrangement, one that would include their daughters, who had moved away.

“It was a quandary for them,” Terry said.

The children, then in their 20s, kept nudging the process ahead. In 1978, Alton finally determined he would keep the farm intact and will it to those who would work it. He incorporated the estate as Tide Mill Farm and began gifting ownership shares to Terry, Bob and their wives, Cathy and Jane. Alton died in 1983. By the time Helen passed away in 1988, the enterprise was portioned out in pieces small enough to avoid triggering tax payments.

“In the end we finally pulled it off,” Cathy said. “But I’m not going to say it was easy.”

Today, Tide Mill’s entire 1,600 acres are protected in a land trust. The necessary wills and estate plans are in place. But when the younger generation began returning to the farm in the 1990s, the four families and three generations found themselves stumbling over just how to collectively manage the endeavor.

Linda Godfrey of the Atlantic Leadership Institute in Eastport entered the picture five years ago as a business consultant. She began meeting individually and once a year or so with the Bells as a group.

As in any family business, there were tensions playing out in the group, Godfrey said. But the roadblocks to progress ran deeper.

“Behavior is just a symptom, not the real issue,” she said. Among the more crucial points were that the elder Bells had poured so much into raising their children, into fostering the transition from the prior generation and into making ends meet on the farm, “that they had not given enough attention to who they were now and who they were going to be.”

Family communication quickly became as important as any other tool on the farm. As a result, Tide Mill has grown more complex than ever. Timber, blueberries, organic vegetables, livestock and wreath making are all growing aspects of the business. Threaded through all of it is a respect given to up-and-coming ideas.

“We’re not all in the same business,” said Terry’s 27-year-old daughter, Rachel. “But we’re sharing this land together and we’re sharing a vision and trying to make our businesses complementary in a way that we all benefit.”

A mother, an artist, a farmer and an activist, Rachel says she and her peers on the farm: a brother, cousins, spouses, all grew up a bit less concerned than their parents with the thought of cash flow. They are now reaching a stage, some as parents themselves, where their imaginations are turning in a more businesslike direction.

“So there is a strong sense of that – a lot of care and attention given to thinking about what other people are doing, and honoring everyone’s individual dreams as part of a whole picture,” she said.

For their part, Bob and Terry grew up so close they often knew what each other were thinking. So the need to listen to sometimes wild ideas, and to piece them into the already complicated working mural of the farm, can feel like another task added to a long list of daily chores.

“But our dreams are to have our children here and happy and making a living,” Terry said. “So if we have to sit down and talk forever, that’s part of hoping that solves the problem.”