The Maiberger siblings typify the family-business dream. Joe, Mark, Luke and Anne Maiberger-Kopacz run P&R Paper Supply of Redlands, after gradually taking over the company from their parents, Pat and Ralph Maiberger, some 30 years ago.

Joe Maiberger, CFO, says the transition was smooth; the siblings get along and bring different areas of expertise to the job. But the move also relied on complicated legal work. Now the Maibergers are slowly passing the company, with $80 million in annual revenues, to six members of its third generation.

Experts would say the Maibergers did everything right: Pat and Ralph discussed things with their children, and then hired experts to document everything. The transaction required Ralph to gift his children stock in the company, Joe said. In turn they paid him under an "agreement not to compete," effectively to provide a pension.

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Frank Bellino/Special to the Business Press

P & R Paper owners Joe Maiberger, Anne Maiberger-Kopacz, Luke Maiberger and Mark Maiberger had no shortcuts when they purchased the company from their parents in 1991.

"It's frustrating that we had to do all this," Joe Maiberger said, but it was necessary for tax purposes.

The family paid an attorney and CPA thousands of dollars, he said - and its "ironclad" nature was worth it.

Herman DeJong, 59, owns DeJong's Dairy in Wildomar. He bought it in 1973 from his father - purchased it outright to avoid squabbles with his six siblings. Today DeJong's three grown children work with him. But DeJong said his kids aren't interested in running the dairy when he retires, likely at age 75, or dies. He knows he needs to have plans on paper, like experts recommend, and understands that not everyone is cut out for dairy work and that he may have to sell someday rather than pass the business down.

That's still an "exit plan," and experts who deal with those note that anyone running any business needs one. When the company is family owned, if that plan is to pass the business from one generation to the next, there are complex money matters involved.

If a business owner dies leaving the company to his children, certain legal documents drawn up in advance that can prevent or minimize estate taxes, experts said. The key is the owner must work out with his family what he'd like to do, and have a CPA, attorney or other expert draw up paperwork to ensure the plan's carried out. The documentation gets complicated because there are so many possible scenarios.

For example, if the business is the biggest asset in an estate, heirs can't easily pull any capital out of it as their inheritance, a problem if estate taxes are due. Another challenge: one child is involved in the family firm, or wants to be, and others don't. How can the parent leave a roughly equal amount of inheritance to each child when the bulk of the estate is the firm?

The first step is obtaining an assessment of the business' value, said Allan Cutrow, head of the trust and estate practice at L.A. law firm Mitchell Silberberg & Knupp. That determines whether heirs face a potential tax bill.

"Professionals have a lot of tools available addressing, and to some extent ameliorating, the tax issues," Cutrow said, and also the matter of leaving something to heirs who won't get the business. Among those tools: lifetime gifting techniques, life insurance or extending tax payments over time.

Robert Gellman, managing director of San Diego CPA firm CBIZ MHM, described an "irrevocable life insurance trust" that makes a life insurance payment available to heirs that don't inherit the business. But there are many types of trusts.

Ted Collins, owner, and Royce Stutzman, president, of Exit Transition Strategy, a Glendora consulting firm, said a business owner first must decide who to transfer the company to (family or a third party?); when to transfer and how much he'll need to live on afterward. Then comes valuation of the business, and strategizing how to increase or preserve value until the time of the transfer.

Sometimes it's best for heirs to take over a family business in phases, Stutzman said.

The founder of the family firm often dreams that his children will take over the business, running it in harmony and prosperity.

"Some people can't get past that," Cutrow said.

Therein lies another challenge: family dynamics.

Heirs may not have the skills - or ability to work together - to keep a firm humming along, Cutrow noted. Sometimes the founder's the problem, Stutzman said: "The parents have a hard time letting go."

Gellman agreed: "The biggest part of a family business is that trust that has to be there between the older generation that's in power and the younger one that wants to come in."

Other difficulties? Heirs want the financial benefits of ownership but not the burden of running the business. Or three heirs fail to understand that an operation that supported their parents can't support three families; they'd have to triple the firm's revenue to gain the same compensation their parents enjoyed. Or somebody gets hysterical every time the subject's broached. The potential problems and disputes only grow with the number of people involved in each successive generation, experts said.

"In a perfect world with emotionally secure adults you ought to sit down and have this conversation," Cutrow said.

Gellman urges the younger generation to gain professional experience elsewhere before starting to work with the family business, as the Maibergers did. That gives them more credibility with their parents and other employees. At least get a taste of the business before committing to joining it. DeJong worked at an Oregon dairy his father owned before buying the one in Wildomar. "It never stops raining (in Oregon)," he said. "Milking cows in the rain is no fun."

Finally, "communication is absolutely critical," Stutzman said. If the owner dies without a plan in place, the heirs face a tax bill, and while they figure out what to do, the business "depreciates really quickly," he said, because nobody's running it effectively in the interim.

Not surprisingly, experts urge hiring a CPA, attorney or estate planner - ask for a trust officer or someone with experience in "exit strategy and succession planning," Gellman said - to deal with all this rather than attempting it in-house with software.

"This is very customized stuff," Gellman said. "There are tools out there," but if families don't set everything up precisely, "the IRS will say it's a sham."

Maiberger offered this advice: "You need to start planning sooner rather than later," and if more than one heir will be involved in the company, "have separation of duties with as little overlap as possible. ... The business can't sustain itself if you don't have the right people in key positions."