A Classic Failed Estate Plan

Louis Feil wasn’t widely-known, but he was a successful, prosperous real estate owner and developer in New York City. He expanded the operation, so the family owns properties well beyond New York. He died in 1999 with the intention of keeping the business in the family. One son, who already was running the business, was designated to run it while he shared ownership with his other siblings. As this report in The Wall Street Journal reveals, (subscription might be required) this was a classic estate planning mistake. It is rare that siblings can own a family business together after the parents pass on, especially when only one is running the business.

In this case, the classic charges are made. The siblings who are outside the business allege that they aren’t receiving a fair share of profits and that the sibling running the business is doing so for his own benefit. In this case, they specifically allege that he is starving them of cash so that he can buy them out on the cheap.

Most of the time, the best way to pass on a family business is to split it so that each sibling owns a divisible, separate operation. In this case, that would have been easy to do, since each could be made owner of different properties. Of course, there are advantages to having one entity own all the properties. Costs could be reducing and purchasing power for new properties enhanced. But for those benefits to accrue, the siblings have to get along and be able to cooperate under joint ownership. Most of the time it is better to split a business or other large properties among the siblings. Let them decide to become partners later if they think they can handle it.

Feil family tensions began after Louis died in 1999 and increased after his wife, Gertrude, died in 2006, according to Feil family members. Court cases involving some or all of the siblings are being waged in three courts in New York and Louisiana. “The binding of the book became loose when my father died,” said Jeffrey Feil. “The pages fell out after my mother died.”

Mr. Feil and the sisters declined to comment on the litigation. Mr. Feil, Ms. Barry and Carole Feil said in interviews they still hope a reconciliation is possible. Ms. Jaffe couldn’t be reached for comment.

“It would make my father sick if he knew what was happening to us,” Carole Feil said.

Many of the initial actions involved demands by the sisters to see records that Mr. Feil controlled. More recently, the sisters have moved to liquidate a portion of the empire.