Estate planning can help businesses survive ownership changes

Can estate planning help a business that is transitioning owners to avoid collapse? Absolutely.

Without an estate plan, a business whose owner passes might see its value reduced almost in half due to estate taxes. An estate plan can name co-owners and prevent other heirs from attempting to seize and liquidate their potential shares in the business.

Specifically, one option for a business with co-owners is a buy-sell agreement. This instrument allows the co-owner to automatically purchase the deceased owner’s shares without any interference from the deceased’s beneficiaries.

An estate plan can also utilize trusts to help ensure the smooth and continued operation of a business after an owner’s passing. For example, a grantor retained annuity trust is a type of irrevocable trust that may help minimize the taxes on appreciated assets. The grantor transfers assets into the GRAT, and is permitted to receive an annual annuity payment for a set number of years. When that period expires, the trust principal is distributed to the named beneficiaries of the GRAT.

Finally, estate planning can also preserve the brand and style of a business. That control is possible because trusts allow flexible terms for how and when the trustee distributes payments or benefits to the beneficiaries. Of course, the same lasting impact can be utilized on a personal level, perhaps with a grantor who desired to impart certain values to his named beneficiaries.

Our law firm is well versed in a number of estate planning instruments designed to preserve assets through gift transfers, trusts and other strategies. Since we also focus on tax law, we are particularly well situated to advise business clients on estate planning strategies that will minimize taxes.


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