BoardConverting Serving the North American Corrugated and Folding Carton Industries for 38 years November 21, 2022 VOL. 38, NO. 47
Using Family Business Trusts As Protection From Outside Threats BY PHILLIP M. PERRY James runs a rapidly growing family business. Things are going great now, but he worries about the future. If he should suddenly become incapacitated, who will run the enterprise for the benefit of his wife and children, none of whom has yet mastered the skills required to manage a commercial operation?
Atlantic Packaging Opens Facility In Henderson, NV Wilmington, North Carolina based Atlantic Packaging has announced the opening of a new facility in Henderson, Nevada which will further support the company’s growing West Coast customer base and the adoption of sus- tainable packaging alternatives. Located just outside of Las Vegas, the facil- ity serves as a new shipping point for Atlantic Packaging customers in addition to operating as a showroom and shipping hub for A New Earth Project, a coalition powered by Atlantic Packaging comprised of outdoor enthusiasts, brands, and packaging suppliers leading a global effort to create, scale, and advocate for sustainable packaging solutions. “With this latest expansion, Atlantic en- sures the same high-level of service and effi- cient delivery that we are known for in other parts of the country,” said Atlantic Packaging President Wes Carter. “As we continue to help more brands transition to sustainable packag- ing offerings, the facility allows us to demo the very latest solutions and capabilities to make this transition both seamless and cost-effec- tive for customers.” The expansion supports growing B2B and
After consulting with his attorney, James comes up with a solution: a revocable trust which designates a skilled trustee to take the reins of the business in the event James can no longer perform his duties. By helping to assure the long-term survival of the enterprise, the trust gives the family considerable peace of mind. “A revocable trust is created while a business owner is still alive,” explains Michael P. Sampson, partner in the Minneapolis law firm of Maslon LLP (maslon.com). “It allows the owner to retain control of busi- ness assets while arranging for a trustee to step in and manage things in case the owner becomes incapacitated.” The revocable nature of the trust is important for anyone who, like James, wants to retain own- ership and control of the business assets. And—as we will see next—a revocable trust will also help the family avoid costly probate if James should die. Avoid Probate Family businesses everywhere establish trusts to solve a host of critical problems. Upon the death of the business owner, for example, a trust can protect against costly probate, secure sensitive business in- CONTINUED ON PAGE 24
CONTINUED ON PAGE 4
WHAT’S INSIDE Sonoco To Buy WestRock's Interest In RTC Packaging LLC 12 The Markens Group Wins 2022 Super 60 Award 16 Greif To Acquire Lee Container Corporation 38 Accurate Box Invests In Third Koenig & Bauer Rapida Press 6 x x 8 x x 12 x x 26 x x
EVERYTHING CORRUGATED UNDER
From the employee owners at SUN, Happy Holidays and a very Merry Christmas
Sending you gifts of joy and gratitude. Looking forward to shining with you in 2023.
sunautomation.com
1-410-472-2900
SUN IS THE OFFICIAL REPRESENTATIVE FOR TAIWAN-BASED LATITUDE MACHINERY CORPORATION, ITALY-BASED PARA, AND ISRAEL-BASED HIGHCON
EVERYTHING CORRUGATED UNDER
Machinery and Handling for the Corrugated Board Industry
AVERAGE CONTAINERBOARD PRICES The average prices reported are tabulated from prices PAID by various sources throughout the United States the week previous to issue. Prices in some areas of the country may be higher or lower than the tabulated average. The prices tabulated here are intended only for purposes of reference. They do not connote any commitment to sell any material at the indicated average. Transactions may be completed at any time at a price agreed upon by seller and purchaser.
REGION E. Coast Midwest Southeast Southwest
42# Kraft liner
26# Semi-Chem. Medium
$1005.00-1010.00 $1020.00-1030.00 $1020.00-1030.00 $1020.00-1030.00 $1050.00-1060.00 $1023.00-1032.00
Short Ton Del. Short Ton Del. Short Ton Del. Short Ton Del. Short Ton Del. Short Ton Del.
$940.00-990.00 $955.00-975.00 $955.00-975.00 $955.00-975.00 $975.00-995.00 $958.00-978.00
West Coast U.S. Average
SHEET PRICES BY REGION (AVERAGE) Per 1MSF, local delivery included, 50MSF single item order, truckload delivery. Sheets
E. Coast Midwest South-SW S. CA N.CA/WA-OR US Aver.
200# 275#
$62.26
$72.05
$62.69 $82.80
$85.35 119.54
$73.13 101.29
97.32
99.89
90.86
113.65
More box makers, brokers and end users are relying on the containerboard pricing in Board Converting News to negotiate their contracts than ever before.
OYSTER UP-CHARGE 8.34
8.34
8.34
8.34
8.34
8.34
275# DBL-WALL 350# DBL-WALL
107.46 118.45
114.69 129.32
116.54 137.25 117.82 145.56
141.08 148.46
122.76 131.80
CANADIAN SHEET PRICES (AVERAGE) In Canadian Dollars, per 1MSF, local delivery included, under 50MSF single item order, truckload delivery. 200# 275# Oyster UC 275#DW 350#DW $78.56 $99.18 $9.00 $96.32 $105.83 CANADIAN LINERBOARD & MEDIUM The average prices reported are tabulated from prices PAID by various sources throughout Canada. Prices may be higher or lower in various areas of the country. The prices tabulated here are intended only for purposes of reference. They do not connote any commitment to sell any material at the indicated average. Transactions may be completed at any time at a price agreed upon by seller and purchaser. Prices are Canadian $ and per metric ton.
See the current prices every week right here on Page 3.
Len Prazych at 518-366-9017 lprazych@nvpublications.com
42# Kraft Liner 26#
Semi-Chem Medium
East West
$970.00
$960.00 $995.00
$1,015.00
3
November 21, 2022
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Atlantic Packaging Opens (CONT’D FROM PAGE 1)
Core Competency
consumer demand for sustainable packaging. Customers can learn about the latest packaging standards, including optimal packaging, right sizing and protective packaging through the facility, which currently stocks product from vendors including Berry Plastics, Paragon Films, Shurtape,
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3M, Ranpak, Pregis, ProAmpac and Multi-Wall by Signode. Located at 1085 Alper Center Drive, consultations are available by appointment and can include demos of the S3 Pro System and S3 Multi System for shipping surf boards as well as additional products from A New Earth Project’s New Earth Approved catalog. Visit www.anewearthproj- ect.com and www.atlanticpkg.com .
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© Blower Application Company, Inc., Germantown, WI 2020
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Sonoco To Buy WestRock’s Interest In RTS Packaging LLC For $330M Hartsville, South Carolina based Sonoco Products Com- pany, a diversified global packaging leader, announced it has entered into an agreement to purchase the remaining equity interest in RTS Packaging, LLC from joint venture partner and Atlanta, Georgia based WestRock Company and the WestRock paper mill in Chattanooga, Tennessee, for $330 million in cash. Sonoco also anticipates that it will be able to achieve $40 million of tax benefits from the transaction. Upon com- pletion of the transaction, Sonoco will own 100 percent of RTS, formerly operated as a joint venture between Sono- co (35 percent of ownership interest) and WestRock (65 percent). The transaction has been unanimously approved by
the Sonoco Board of Directors and is expected to close in the first half of 2023. RTS Packaging markets solid fiber partitions from 100 percent recycled paperboard to food and beverage customers.
RTS Packaging was formed in 1997 as a joint venture that combined the former pro- tective packaging operations of WestRock (formerly known as Rock-Tenn Company) and Sonoco to market solid fiber partitions from 100 percent recycled paperboard to glass container manufacturers and producers of wine, liquor, food, and pharmaceuticals. For the year ending December 31, 2022, the ac- quired assets are expected to generate sales of approximately $270 million. The company expects to drive total synergies of $16 million over the next 24 months following closing. The transaction will give Sonoco full own- ership of 14 converting operations, including 10 in the United States, two in Mexico, and two in South America and one paper mill in the United States. Approximately 1,100 indi- viduals will become employees of Sonoco. "RTS Packaging has been a tremendous success for both WestRock and Sonoco. Over the last 25 years, we have worked in true partnership to build a great company,” said Howard Coker, CEO and President of Sono- co. “We are excited to acquire the remaining stake in RTS Packaging and look forward to working with Al Bosma, who will remain as the RTS leader, and the management team to continue to grow the business. “The acquisition is well-aligned with Sono- co’s long-term strategy to focus on our core integrated businesses and expand our sus- tainable consumer packaging portfolio. RTS has exposure to growing beverage markets, as well as unique capabilities to support mar- quee customers in these markets. We look forward to welcoming our RTS colleagues to the Sonoco family and building on these suc- cessful customer partnerships in the future.”
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The Royal Group Names Sergent GM At Progress Container & Display Cicero, Illinois based The Royal Group (TRG) has an- nounced Craig Sergent as the new General Manager of Progress Container & Display. He joins TRG’s most recent acquisition after 12 years of experi- ence in the industry.
Box Shipments ( U.S. Corrugated Product Shipments) Industry Shipments In Billions of Square Feet Month September 2022
Year
Actual
Percent Change Avg Week Percent Change
2022 2021
32.705 34.247
-4.5
7.787 8.154
-4.5
Industry Total
Year-to Date
September 2022
Year
Actual
Percent Change Avg Week Percent Change
Sergent was a sales represen- tative in the Atlanta market before moving into sales management, most recently as General Manager in Nashville, Tennessee. “Craig brings an impressive blend
2022 2021
305.168 312.525
-2.4
7.989 8.224
-2.9
Industry Total
Containerboard Consumption (Thousands of Tons)
Year
Month
Percent Change Year-to-Date Percent Change
Craig Sergent
2022 2021
2.6327 2.7773
-5.2
24.8959 25.4841
-2.3
of energy and experience,” said Kevin Miller, President of TRG. “He is a natural leader with an infectious personality, a truly perfect fit for our company and culture we’ve estab- lished.” Sergent is excited to take on this challenge and join the TRG team. TRG was established over 100 years ago in Chi- cago as a manufacturer and distributor of wooden crates, boxes, and pallets. Since then, TRG has expanded into one of the nation’s largest independent corrugated box and display manufacturers. TRG’s solutions range from industrial packaging and brown box shipping containers to graphic packaging, ecommerce, in-store displays and shelf-ready packaging.
Container Board Inventory - Corrugator Plants (Thousands of Tons)
Corrugator Plants Only
Date
Percent Change Weeks of Supply
Percent Change
Sep. Aug
2.5975 2.5867
0.4
4.1 4.2
-2.4
Shipping Days
Year
Month
Year-to-Date
2022 2021
21 21
191 190
SOURCE: Fibre Box Association
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TAPPI Nominating Committee Announces 2023 TAPPI Board Slate The 2022 TAPPI Nominating Committee has announced the 2023 TAPPI Board Slate: • Chair: Donald Haag, Chair, Retired-PCA • Director: Kelly Frey, Technical Service, Extrusion Coat- ing, Chevron Phillips Chemical Company • Vice Chair: Kim Nelson , CTO Nanocellulose, GranBio • Director: Greg Jones, Executive Vice President, Sun Automation Group • Director: Bill Edwards, Senior Vice President, Pulp & Paper Operations, Domtar Corporation • Director: Leslie Petrie, VP Global EHS, IP The Association’s membership has until November 30, 2022 to submit other nominations to the President and CEO of TAPPI, Larry Montague, lmontague@tappi.org. Nominations must be signed by at least one percent of the voting members, and each voting member may sign for only one such nomination. Each nomination must be accepted in writing by the nominee. The name of each nominee submitted, signed, and accepted will be placed on the election ballot. The election ballot will give voters the options of voting for or against the entire slate or for or against the individual can- didate(s) for each position. Elections will begin December 15, 2022 and conclude
on January 31, 2023. Contact Mary Beth Cornell at (770) 209-7210 or mcor- nell@tappi.org with questions. The following will serve on the Board again in 2023: • Larry Anker, Solenis • Karyn L. Biasca, University of Wisconsin-Stevens Point • Suzanne Blanchet, S.L.B. Inc. • David Buchanan, Voith Paper • Michael Farrell, Graphic Packaging • Larry Montague, President and CEO, TAPPI In March 2023, the following directors and officers will complete their terms: • James R. Haeffele, Essity • Donald Haag, Retired-PCA, will complete his term as Board Vice Chair. He is on the slate for 2023 as Chair. Directors include: • Andy Jones, International Paper • Mark Keaten, GAF • Kim Nelson, GranBio, will complete her term as a Direc- tor. She is on the slate for 2023 as Vice Chair. • Rory Wolf, Retired, ITW Pillar Technologies The Nominating Committee members include Pete Au- gustine, Koerber, Past Board Chair, serving as the Nominat- ing Committee Chair; Gordon Bugg, Kemira; Carrie Enos, University of Maine Pulp and Paper Foundation; Donald Haag, Retired-PCA-Vice Chair TAPPI Board; Paula Hajaki- an, USG, and Larry Montague, President and CEO, TAPPI. For more information, visit tappi.org .
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The Markens Group Wins 2022 Super 60 Award
TMG is proud to announce that it has won a 2022 Super 60 Award. Team members celebrated this achievement at the Springfield Regional Cham- ber’s 2022 Super 60 Awards Luncheon on November 10.
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The annual awards program celebrates the fastest-growing, reve- nue-generating, privately and independently owned businesses in both Hampden or Hampshire County in Massachusetts with revenues of at least $1 million in the last fiscal year and have been in business for at least three years. The program’s honorees are based in several communities across the region and represent all sectors of the economy, including real estate, transportation, sports, dining and entertainment, insurance, ener- gy, health care, manufacturing, and more.
“TMG is honored to be recognized, and we’re inspired to work in a community that celebrates achievement, collaboration, and economic growth,” said Ben Markens, President, and Chief Executive Officer of The Markens Group. Founded in 1988, TMG connects people with common interests and needs to solve problems, share ideas, and develop best practices. TMG pro-
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“By providing excellent client experiences, em- powering team members to learn and grow, and creating and implementing successful processes, we’ve been able to cultivate a dynamic team that consistently delivers with excellence,” said Emily Leonczyk, Chief Operating Officer at The Markens Group. “Throughout the past year, our team has
worked tirelessly to enhance our services while creating unique experi- ences for our clients – ultimately allowing us to maintain our core business while evolving. We’re thankful for the support and thrilled to celebrate this achievement with our community of peers.” Visit https://markens.com for more information. Emily Leonczyk
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CNG Kelly Spicers Division Acquires Connemara West Coast Operations Purchase, New York based Central National Gottesman Inc. (CNG) announced that its Kelly Spicers division is ac- quiring the West Coast operations of Connemara Convert- ing, a custom paper and board converting company and supplier to label printers, envelope converters, and paper and packaging distributors. The acquisition of Connemara expands Kelly Spicers’ Custom Converting operation to seven sheeters spread across the West, including Salt Lake City, Seattle, and the Santa Fe Springs, California headquarters, where a newly acquired slitter/rewinder will also be located. “Our North American Distribution business is focused on finding ways to meet the changing demands within the industry, and we are excited to expand our capabilities in the Custom Converting space,” said Andrew Wallach, CNG President and CEO. “Our ability to custom cut paper, board, and wide format products creates a clear advan- tage for our clients.” Custom Converting allows customers to use only what they need by reducing the size of the sheet down to the actual area to be printed, cutting waste by as much as 30 percent compared to a standard size sheet. The addition of new equipment and an experienced team of professionals from Connemara's Ontario, Cal-
ifornia based operation underscores Kelly Spicers’ com- mitment to Custom Converting, a legacy service that the company has offered for decades. “We’ve been in the Custom Converting space for a long time, so adding Connemara to our existing operations makes sense as we continue to diversify and offer more options to our customers and suppliers,” said Jan Gottes-
man, President of Kelly Spicers. “We couldn’t be more thrilled to welcome the Connemara team and all their ex- pertise to Kelly Spicers.” The Connemara Ontario operations will relocate to the Kelly Spicers Santa Fe Springs facility in early 2023. Kelly Spicers is committed to the ongoing investment in its core business at eight regional locations and 29 retail stores serving the Western U.S. and Hawaii.
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Greif To Acquire Lee Container Corporation
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Delaware, Ohio based Greif, Inc. has announced it has entered into an agreement to acquire Lee Container Cor- poration, Inc., a manufacturer of high-performance barrier and conventional blow molded containers, for $300 mil- lion. The purchase price is before taking into consider- ation the tax benefits which has an estimated net present value of approximately $30 million. The all-cash transaction will be funded through Greif's existing credit facility and is expected to close by the end of the calendar year. Lee Container is a leader in the North American blow molded jerrycan industry, primarily serving growth-orient- ed customers in the agrochemical, other specialty chemi- cal, oil and lubricant, and pet care segments. Lee Contain- er operates three manufacturing facilities in Homerville, Georgia; Centerville; and Nacogdoches, Texas, with over 500 employees throughout the U.S. For the last 12 months ending September 30, 2022, Lee generated sales of $162 million and adjusted EBITDA of $33 million. As part of the acquisition Greif also expects to realize approximately $6 million in synergies within the first two years of ownership. "The acquisition of Lee Container is a critical step in our continued Build to Last journey," said Ole Rosgaard, President and Chief Executive Officer of Greif. "Lee is an exceptional strategic and cultural fit, with exceptional peo- ple and values as well as a favorable mix of product and end market exposures. “The Lee acquisition solidifies our commitment to grow- ing our jerrycan and small plastic bottle footprint and adds a further growth engine to our GIP business. I am excited to welcome our new colleagues to the Greif family and look forward to growing our business together with them." Robert Varnedoe, Chief Executive Officer of Lee Con- tainer, said that the Lee Container family is excited about the acquisition and the opportunities it presents for its col- leagues, customers and suppliers. "Greif brings additional industry expertise, scale, and customer service focus that will be formative in continuing the strong growth fundamentals of the company,” Varne- doe said. “Our customers and suppliers will benefit from the enhanced product offering of Greif, and I'm most ex- cited that our colleagues will join a thriving, people-first culture at Greif." The acquisition represents numerous key strategic benefits, including: • Immediate scale in jerrycans and small plastic bottles in North America, with a platform for future growth through organic and inorganic reinvestment opportu- nities • Exposure to growing agricultural and specialty chemi- cals end markets, which offers portfolio diversification benefits to Greif's GIP business mix.
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Sappi North America To Convert Paper Machine To Produce SBS Sappi North America, a global producer and supplier of di- versified woodfibre products, announced the approval of a $418 million capital project to convert Paper Machine No. 2 at its Somerset Mill in Skowhegan, Maine, to increase its capacity and produce solid bleached sulfate board (SBS) products. The project will be funded from free cash flow. “This move complements our long-term Thrive25 strategy, which focuses on growing our portfolio in pack- aging and specialty papers, pulp and biomaterials,” said Mike Haws, President and CEO of Sappi North America. “By investing in our business to pursue growing areas of demand, we can remain profitable and competitive in the global marketplace” Demand for packaging and specialty papers in North
America is particularly robust, especially since SBS is a more environmentally sustainable alternative to plastic packaging, and customers are actively seeking to increase their volumes with Sappi North America. SBS is used in premium packaging for cosmetics and perfume, health and beauty care, consumer electronics, confectionary, luxury drinks and more. Foodservice items such as plates, dishes and cups also use SBS as a sustainable alternative to plastic. “Somerset’s existing world-class infrastructure and suc- cess in producing high quality SBS products, together with its talented workforce, make the mill an excellent and ob- vious choice for this investment,” said Haws. “Increasing our flexibility and expanding the paper mill’s capability and capacity will ensure that we continue to make superior products at Somerset for years to come.” The planned project at the Somerset Mill in Maine is slated to come online early in 2025. Lipscomb Joins Mill Rock Packaging As COO
DESIGNS THAT INCREASE PRODUCTION
New York City, New York, based Mill Rock Capital, a private investment firm, announced that its portfolio company Mill Rock Packaging Partners LLC has named Bruce Lipscomb as its Chief Operating Officer, a new position for the company. Lipscomb is an accomplished operations executive with extensive experience leading organizations, supervising plants and over- seeing various functions within the packaging and print industries. Prior to joining Mill Rock Packaging, he worked for nearly 30 years with RR Donnelley, where he was a Senior Vice President of Operations with responsibility over multiple sites. Lipscomb previously led many other func- tions including manufacturing and supply chain while building continuous improvement capability in operations. "Bruce is a leader with an exceptional track record, and on behalf of the entire Mill Rock Packaging team, we are pleased that he is joining as our COO," said Allen Ennis, Mill Rock Packaging CEO. "With growth comes the need to continually scale our capabilities and increase the service levels to our customers, and the formation of this new position will help lead our forward momentum. I am looking for- ward to working closely with Bruce as a key member of our leadership team." As Chief Operating Officer, Lipscomb will oversee all aspects of manufacturing, includ- ing ultimate oversight for Mill Rock Packag- ing's current five production facilities.
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December Deadlines Approaching For TAPPI Award Nominations Nominations are currently being accepted for several TAPPI Division awards, including the Women in Industry Division’s (WIN) TAPPI Woman of the Year, the PIMA Divi- sion awards, and the International Research Management Committee’s (IRMC) Research and Development Technical Award and William H. Aiken Prize. Deadlines vary by award, but nominations are due De- cember 1, 2022 for the TAPPI Woman of the Year and De- cember 18, 2022 for many of the other awards. TAPPI Division awards recognize individuals for their outstanding accomplishments or contributions to the in- dustry’s technology or TAPPI. Each Technical Division may grant no more than one award for technical achievement and one for leadership and service per year. Some awards also are accompanied by a cash prize. Many of the awards will be presented at TAPPICon, April 22-26, 2023 in Atlanta, Georgia. Nominations are encouraged for individuals who lead by example in their service to others, exemplary manage- ment, remarkable contributions, and those who are work- ing to secure the industry’s future. For details on all TAPPI awards and links to the nomina- tion forms, visit tappi.org .
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Corrugated printing has gone from basic to beautiful in 10 years. With the explosion of packaging demands and shorter print runs, speed has become the #1 capacity driver.
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P+PB: PACK EXPO Was Reminder Of Sustainable Solutions Ahead BY MARY ANN HANSAN This year the Paper and Packaging Board team and B2B partner, Stein IAS, joined some 40,000+ people attending
PACK EXPO at McCormick Place in Chicago, Illinois. Their largely corru- gated booth and props played off the Pack to the Future theme offering a virtual reality experience about the sustainability of our working forests along with a photo opportunity with a corrugated, DeLorean-inspired car.
Mary Ann Hansan
Many of the companies were actively looking for solu- tions to help them substitute elements of their packaging with paper-based solutions. The paper and packaging
industry is perfectly positioned to connect and amplify this trend, helping to establish the narrative that taking proactive action to move to paper-based approaches is
increasingly an essential element of being an environmentally responsible manufacturer. In- novation is at the heart of the next generation of sustainability. It is important that customers and shippers see the paper and packaging industry as col- laborative innovators who will partner with them to deliver solutions that will meet their sustainability goals. According to PMMI, The Association for Packaging and Processing Technologies, more than 90 percent of Fortune 500 companies publish sustainability reports; 89 percent of those companies revealed recy- clable design is a key sustainability strategy, 80 percent want source-reduced packaging, and 56 percent want packaging made from renew- able materials. Downstream packaging customers and box companies were found to be highly receptive to the Box to Nature recycling message. It should be made as easy as possible for them to participate, either directly through the P+PB or through their paper and box manufacturers. Making clear that the major box manufacturers are involved in Box to Nature goes a long way to establishing credibility and interest. If com- panies funding the P+PB program promote their involvement, there is likely to be strong interest among many of their customers who ship to consumers. According to P+PB, it feels like we are in the midst of a sea of change in materials selection. There is an opportunity and a responsibility to make sure the packaging industry is the center of that conversation, and ready with answers to the questions customers and consumers are asking. Visit paperandpackaging.org for more in- formation and resources.
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Using Family Trusts (CONT’D FROM PAGE 1)
In addition to saving you money, avoiding probate can also protect your business secrets. “You might not want your competitors looking up your will at the courthouse to see how much money or debt your family has,” says Sampson. Public records are also sometimes accessed by predators who try to victimize people who have inherit- ed money. “Having your property passed along under the
formation from prying eyes, guard family assets from crip- pling lawsuits and creditor claims, and even obviate turf wars by surviving children. (The traditional use of trusts to avoid estate taxes has become less important, since fed- eral tax law recently increased the estate tax exemption to $11.2 million for individuals and $22.4 million for married couples.) The good news is that trusts can be created by all sizes of organizations. “Even smaller family businesses can uti- lize trusts,” says John J. Scroggin, partner in Atlanta-based Scroggin & Company, a law firm active in business and es- tate planning ( scrogginlaw.com ). “The issue is driven not by size, in terms of revenues or assets, but by a desire for long term protection of a business.” How can you use trusts to help your own family busi- ness? For starters, consider using one to efficiently allo- cate assets to the younger generation. Although a will can do the same thing, a trust is more difficult to challenge and has the advantage of avoiding probate. “Probate can be expensive and time consuming,” says Sampson. “This is especially true in states such as California, Florida, Illinois, and New York, where probate is very complicated, or for businesses operating in more than one state.” In the latter case, survivors may have to deal with the complications required to satisfy the requirements of more than one set of probate laws.
terms of a trust avoids the creation of public records that result from court involvement.” Protect Assets Can a trust which allocates family business assets to the next generation be revocable? Yes, but that has inher- ent risks. Consider Sarah, who wants to do just that. Sar-
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Using Family Trusts (CONT’D FROM PAGE 24)
ah’s attorney tells her that if she makes the trust revocable, all of the business assets will remain under the ownership of the family. As a result, they will be at the risk of being attached by creditors or lost in lawsuits. The assets might also be seized to satisfy any nursing home bills incurred by the person who establishes the trust. For these reasons, Sarah decides to set up an irrevoca- ble trust. Because the trust will own the business assets, they will not be subject to above risks of loss, either before or after Beth dies. The terms of an irrevocable trust can address the de- mands of complex family dynamics. Here are a few exam- ples: To Protect The Income Of A Young Child Adam and Sylvia, who own all of the stock of ABC Com- pany, have a nine-year-old child named Jane. They estab- lish an irrevocable trust that designates Adam’s brother Jason as the trustee. In the event of the death of the par- ents, Jason will run the enterprise. Jane, the trust’s bene- ficiary, will receive stock dividends and distributions from any assets. To Avoid Sibling Disputes Andrew and Beth are concerned that when they die their children might squabble about the family business assets, putting the organization’s survival at risk. Daughter
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Using Family Trusts (CONT’D FROM PAGE 26)
Suzy has already said she wants to run the business, while her brother John feels the business should be sold and the assets distributed. “A trust can designate that Suzy will run the business, and that John will not be involved but will receive a certain amount of money monthly from the trust,” says Nicole N. Middendorf, CEO of Prosperwell Financial, Plymouth, Min- nesota ( prosperwell.com ). “And the trustee will make sure the provisions of the trust are carried out.” In a case like this one, says Middendorf, a trust is es- pecially valuable because it can mandate the disposition of assets at a time when emotions might run high. “Money often brings out greed,” she says. “People can be tempted to make decisions based on their own interests rather than on what makes sense for the future of the company and the family.” To Protect A Victim Of Addiction Bart and Susan want to avoid leaving a sudden windfall to their son Chet, who is struggling with a drug addiction. How can they make sure Chet is taken care of in the event of their deaths, while avoiding a waste of inherited assets? “A trust can designate that Chet receive a certain amount of money every month,” says Middendorf. “Or, to avoid funding the addiction a trust can pay his rent so he always has a roof over his head. The trust could even man- date that he pass a drug test to receive his monthly pay- ment.” A similar arrangement can also help out when the beneficiary might have a mental disability. To Control A Spendthrift Some people are just bad with money. Henry and Ida are afraid that their daughter Beverly will spend her inher- itance on fancy cars and travel. That’s why they decide to set up a “spendthrift trust” that will release funds only for expenses related to health, education, maintenance and support. “A spendthrift trust can be a valuable way to protect beneficiaries from spending all of their inheritance,” says Arlene Cogen, a certified financial planner and philan- thropic leadership consultant based in Portland, Oregon ( arlenecogen.com ). But she warns that it’s not a foolproof mechanism: “Bear in mind beneficiaries can be very cre- ative when it comes to petitioning trustees for health, education, maintenance and support. This can create an adversary relationship between the beneficiary and the trustee. One way around that is to create a trust which provides the individual with a set income stream, so they cannot keep knocking on a trustee’s door for money.” To Obviate Claims From An Estranged Spouse While Amy and Clark feel their son Andy is skilled enough to run the family business, they are concerned about his marriage to an estranged spouse. In the event of a divorce, will the spouse sue to obtain business assets? Scroggin offers this solution: Amy and Clark establish a trust that calls for Andy to be paid a salary for his work,
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Using Family Trusts (CONT’D FROM PAGE 28)
ing of his friends. Furthermore, if Frank remarries and then dies, his new spouse, a stranger to the family, might end up owning a third of the business. And that person might demand an exorbitant buyout to avoid a lawsuit. “In this example, when Deborah dies without any descendants, a trust can call for her interest to pass on to her siblings or their de- scendants,” says Scroggin. “Trusts often are used to as- sure that business interests are retained for the benefit of family members rather than passing to outsiders.” Stay Flexible The above scenarios illustrate the flexibility of irrevoca- ble trusts. They can do all kinds of things for people who are too young to run a business, have no interest in doing so, are incapacitated, or need to be protected from their own damaging decision-making habits. Trusts solve busi- ness problems by separating legal ownership and control of a business from the enjoyment of the business assets by beneficiaries. Flexibility, though, runs both ways. Attorneys advise against micromanaging the family business transition. “Sometimes people take control too far by not including enough flexibility for the beneficiaries,” says Sampson. “As a result, what seems like a reasonable provision in a trust today might make no sense some years down the road.” Sampson gives this example: Mark heard that “incentive trusts” could be established to obviate the problem of a
BCN(US)202209(QS1025)(o)(出血5mm).pdf 1 2022/8/30 下午 02:02:46 To Avoid Claims Arising From A Childless Marriage Harris and Marge have three children named Deborah, Francine and Bart. Deborah is married to a man named Frank but has no children and is not expected to. Harris and Marge are concerned that if Deborah is given some of the equity and then dies, the equity will pass on to Frank, a nonfamily person who may try to dictate business deci- sions, and make unreasonable demands, such as the hir- while the equity of the business, along with any profits, re- mains in the trust for protection from lawsuits. In the same way, a trust can protect business assets from the claims of creditors if the inheriting person is in debt. To Avoid Claims Arising From Multiple Marriages Multiple marriages can create their own problems. James wants to make sure that if he dies his wife Mary receives income for life from the company dividends and asset distributions, so that she can take care of their chil- dren Betty and Jack. However, if Mary should remarry and then later die, James wants to make sure the money from the business then goes directly to Betty and Jack, and not to Mary’s new spouse or to that individual’s own children. Again, a trust can mandate this more complex asset dis- tribution pattern. “The division between ownership and benefits can be helpful when people get married more than once and have children from multiple spouses,” says Sampson.
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Using Family Trusts (CONT’D FROM PAGE 30)
say ‘no’ to the beneficiaries. The balancing act is to pro- vide enough flexibility without giving so much freedom that the trust becomes a sham.” Discretionary Payments As the above comments suggest, trusts need to recog- nize the possibility of future surprises. That’s why the trend today is toward the use of “Discretionary Trusts,” irrevoca- ble trusts which do not specify a set amount of income for beneficiaries but allow for trustee discretion. Sampson says that many business owners tell the trust- ees something like this: “I want my kids to be educated, and I don’t want them living in a van because they encoun- ter a health problem. But I do not want the money used for lifestyle enhancement.” Such terms may be included in the trust itself or in a side letter addressed to the trustee. Discretionary trusts offer considerable protection from creditors and lawsuits. That’s because the law says a cred- itor can only access the assets of an irrevocable trust to the same extent as the beneficiary. So if the beneficiary cannot get at the money in the trust to pay a business ex- pense without the permission of the trustee, neither can a creditor. Discretionary trusts also free the trustee to invest for the highest total return without needing to worry about meeting arbitrary mandated payouts. So, for example, the trustee may decide to invest more money in a broad bas- ket of stocks and bonds rather than only in lower-yield-
child becoming a “trust baby” and slacking off instead of working. So to inspire a work ethic in his son Jerry, Mark established a trust that would provide distributions to match his son’s earned income each year. However, Mark’s attorney encouraged the inclusion of a provision allowing additional distributions in the trustee’s discretion, just to provide flexibility. One day Jerry was driving home on a motorcycle when a serious accident left him unable to ever work again. If it were not for the provision allowing discretionary distri- butions beyond the amount of Jerry’s earned income, the trust assets would not have been available to provide the money required for his medical attendant. That story carries a moral. “Don’t try to design for a sce- nario that is too specific,” advises Sampson. “It’s a good idea to include a provision that the trustee can make distri- butions of income and principal in the trustee’s discretion just in case something unanticipated happens.” Sampson also suggests another point of flexibility: the ability to change a trustee who is uncommunicative or too tight with distributions. “There should be a way to replace the trustee,” he says. “You can even give that power to beneficiaries as long as the new trustee is truly indepen- dent. The replacement should not be an employee of one of the beneficiaries, for example, or a relative. The flip side is that the trustee must be strong enough to sometimes
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