03 Jun Why Trust Isn’t Enough in Deals with Family and Friends
The $14 Million Handshake That Destroyed a Family
They were brothers. Business partners. Best friends.
And they lost everything. Not just the $14 million real estate investment in the Hamptons… but their relationship, their trust, and eventually, their family.
It all started with a handshake.
It ended with lawsuits, resentment, and empty chairs at Thanksgiving.
And before you tell yourself, “That’ll never happen to us,” let me tell you what they said before it all fell apart:
“We’re family—we don’t need anything formal.”
“We trust each other.”
“We’ll figure it out when the time comes.”
Sound familiar?
If you’re in business with a sibling, a lifelong friend, or someone you trust like family, this story is about you.
Because the very thing you think protects you—trust—is exactly what leaves you exposed when the unexpected happens. And in business, the unexpected always happens. It’s just a matter of time.
Let me show you what happens when smart people ignore that truth.
The Investment That Started With Trust—and Ended With Trauma
Peter and Michael (names changed, obviously) inherited a decent chunk of money from their father, who had built up a successful contracting business in the ‘70s. Both had done well on their own—Peter in commercial real estate, Michael in hospitality.
When the opportunity came to jointly purchase and develop a $14 million property in the Hamptons, it seemed like a no-brainer. Prime land. Upscale demand. Deep pockets. They were confident, aligned, and most of all—family.
They formed a business entity for a few hundred dollars through an online website, used an online template for a partnership agreement, set up a joint bank account, and agreed to split everything 50/50.
Here’s what they didn’t see coming:
- Construction delays ballooned costs by $2.4 million
- Michael couldn’t contribute more capital. Peter could
- Disagreements over design choices turned into personal insults
- One brother wanted to sell the property early, the other didn’t
- No clear path existed for resolving disputes or valuing equity
They were in a high-stakes standoff with no rules. The result?
Litigation.
Frozen assets.
A forced sale at a discount.
And two brothers who haven’t spoken in three years.
The deal didn’t just collapse. It detonated. And the collateral damage extended far beyond the balance sheet.
No more holidays together.
No more family vacations.
No more trust.
And it all could have been avoided.
Why “We Trust Each Other” Is a Dangerous Business Plan
If you’re investing or operating a business with someone you trust, especially a sibling, childhood friend, or long-time partner, you may be more at risk than if you were going in with a stranger.
Why?
Because trust makes you complacent.
It convinces you that conversations can wait. That formalities are unnecessary. That “we’re different.”
But when the market shifts…
Or one of you needs out…
Or personal circumstances change (death, divorce, disability)…
Trust won’t protect you.
A real plan will.
What a Real Plan Looks Like
A real plan isn’t a handshake.
It’s not a template downloaded from the internet.
And it’s not a one-page document that skips over the hard stuff.
A real plan is a guided process, led by an experienced business attorney, where you and your partners actually talk about:
- What happens when one of you wants out
- How ownership shares evolve with capital contributions
- What to do if one of you dies, divorces, or becomes incapacitated
- Who makes the final call when you disagree
- How to value the business if it needs to be sold or one partner needs to be bought out
And most importantly, a real plan preserves your most valuable asset . . . not the building or the business . . .
The relationship.
Because once that’s gone, there’s no amount of money that’ll bring it back.
You Need More Than a Legal Document. You Need a Plan.
At Garza Business & Estate Law, we don’t sell templates. We don’t churn out generic documents. And we don’t work with just anyone.
We work with a select group of business owners each year. Especially those running closely-held companies with partners they care about.
We help them do the hard work upfront, so they don’t pay the hard price later.
If you’re involved in a company, deal, or investment and you’re partnering with someone you really care about, you can’t afford to wing it.
You need a strategic legal plan that protects the business and the bond between you and your partner.
Apply to work with us here:
https://lgarzalaw.com/schedule-online/
We’re selective. We don’t take every deal. But if we accept your application, we’ll help you build something that lasts. And doesn’t leave wreckage in its wake.
Because no real estate deal is worth your family.
And no friendship should be sacrificed to poor planning.
Don’t let trust become your blind spot.
Build a plan that protects everything that matters.
