Family Has a Hard Time Arriving at Buyout Value for Shares in a Corporation

By: Myron Friesen

We have a big family with seven children. My husband and I have owned much of our farmland for over 50 years. Unfortunately, much of it ended up in a C corporation that was eventually converted to an S corporation. Several times over the last 20 years, we were advised to give shares to our children in fear of federal estate tax changes. The average value back then was less than $1,000 per share. Now, our children own a lot of stock, and it’s valued at over $3,000 per share.

Ironically, due to the increased limits, we don’t have an estate tax problem, but we do have a problem with all the shares we gave away and who we gave them to. When we gave all our children shares, we got everyone together to explain our intentions and why we made the gift. Ten years ago, they agreed to a buy-sell agreement. However, it did not include enough details. Now the time has come to implement the buy-sell agreement, and we are having a hard time getting people to agree on a price. As a parent, this is very upsetting because some of the kids have already forgotten our intentions. Our farming heir feels like he’s being ganged up on, and our nonfarming heirs feel like they should be getting more. What can we do now?