Gift, Estate, & Income Tax Compliance
2018 02 Value Matters

February 1, 2018

Mercer Capital’s Value Matters® 2018-02

Dividend Policy and the Meaning of Life

(Or, At Least, Your Business)

Our multi-generation family business clients ask us about dividend policy more often than any other topic. This isn’t surprising, since returns to family business shareholders come in only two forms: current income from dividends and capital appreciation. For many shareholders, capital appreciation is what makes them wealthy, but current income is what makes them feel wealthy.

In other words, dividends are the most transparent expression of what the family business means to the family economically. Knowing what the business “means” to the family is essential for promoting positive shareholder engagement, family harmony, and sustainability.

The business may “mean” different things to the family at different times (or, to different members of the family at the same time). In our experience, there are four broad “meanings” that a family business can have. 

These “meanings” are not mutually exclusive, but one will usually predominate at a given time. Importantly, the “meaning” of the business has implications for dividend policy.

  • Meaning #1 - The family business is an economic growth engine for future generations. For some families, the business is perceived as a vehicle for increasing per capita family wealth over time. For these families, dividends are likely to take a backseat to reinvestment in the business needed to fuel the growth required to keep pace with the biological growth of the family. 
  • Meaning #2 - The family business is a store of value for the family. For other families, the business is perceived as a means of capital preservation.

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March 2026 | Fixing Price or Fixing Risk?
Value Matters® March 2026

Fixing Price or Fixing Risk? | Sections 2031, 2703, Huffman, and the Case for Independent Valuation

Buy-sell agreements are foundational planning tools for closely held businesses. When thoughtfully structured, they provide continuity, liquidity, and governance stability. If not drafted carefully, they can undermine estate planning objectives and create significant transfer tax exposure. For advisors of closely held business owners, the recurring question is not whether to use a buy-sell agreement, but whether the pricing mechanism embedded in the agreement will be respected for estate and gift tax purposes.
WEBINAR: Buy-Sell Agreements: What Estate Planners Need To Know
UPCOMING WEBINAR | Buy-Sell Agreements: What Estate Planners Need To Know
This webinar provides advanced estate planning attorneys with a comprehensive examination of buy-sell agreements in closely held businesses, focusing on their structure, valuation, and tax implications.
Mercer Capital Proudly Sponsors and Attends the ACTEC 2026 Annual Meeting
Mercer Capital Proudly Sponsors and Attends the ACTEC 2026 Annual Meeting
Mercer Capital is pleased to again sponsor the American College of Trust and Estate Counsel’s (ACTEC) 2026 Annual Meeting, taking place March 4–8, 2026, in Tampa, Florida. As a valued partner in the trust and estate planning community, Mercer Capital is proud to support this premier event, which brings together leading legal and financial professionals to explore today’s most pressing issues in trust and estate law, planning, and related advisory matters.The ACTEC Annual Meeting features an extensive program of professional seminars, committee sessions, and networking activities, hosted at the JW Marriott Water Street and the Tampa Marriott Water Street in Tampa Bay. Attendees can engage in deep dives on emerging legal trends, practical planning strategies, and peer-to-peer dialogue throughout the week.Mercer Capital’s Travis W. Harms, CFA, CPA, ABV; Timothy K. Bronza, CPA, ASA; and Thomas C. Insalaco, CFA, ASA will be attending this year. Their participation reflects the firm’s deep commitment to ongoing education and to providing thoughtful and objective valuation, tax, and advisory insight to the trust and estate community.Travis Harms is President of Mercer Capital and leads the firm’s Family Business Advisory Services Group. With deep expertise in valuation for gift, estate, and income tax planning, Travis provides strategic financial consulting and education to multi-generation family businesses, helping align financial realities with long-term succession goals.Tim Bronza serves as Managing Director of Mercer Capital’s Florida office. He brings extensive experience valuing business interests for federal gift, estate, and income tax purposes supporting sophisticated valuation assignments across corporate and fiduciary contexts.Tom Insalaco is a Senior Vice President in Mercer Capital’s Florida office. Since 2008, Tom has performed valuation analyses for a broad range of industries, assisting attorneys, fiduciaries, and financial professionals with estate planning, exit planning, and transactional valuation needs.Mercer Capital looks forward to seeing old friends and making new ones during the meeting. For more information about Mercer Capital’s Gift, Estate, and Income Tax Compliance practice, click here.

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