Your Business IsYour Legacy

Without proper succession planning, your closely held business may need to be sold to pay estate taxes or debts, or ownership could fragment among heirs who disagree on operations. A buy-sell agreement, funded with life insurance, ensures a smooth transition. Business succession planning should begin at least 3-5 years before your intended exit.

The most tax-efficient strategies include gifting shares annually using the gift tax exclusion, creating a Family Limited Partnership (FLP) to transfer ownership at a discount, establishing a Grantor Retained Annuity Trust (GRAT), or using an Intentionally Defective Grantor Trust (IDGT). Each method has different tax implications depending on your business valuation and family structure.

A buy-sell agreement is a legally binding contract that determines what happens to a business owner's share when they die, become disabled, retire, or want to sell. If you have business partners or co-owners, you absolutely need one. It sets the price, terms, and funding mechanism (usually life insurance) to prevent disputes and ensure business continuity.

Yes. A revocable living trust can hold your business interests, ensuring seamless management if you become incapacitated and avoiding probate at death. For tax planning, an irrevocable trust like an IDGT can freeze the business value for estate tax purposes while you retain income tax obligations, effectively reducing your taxable estate.

The IRS requires fair market value, typically determined through a qualified business appraiser using approaches like discounted cash flow, comparable transactions, or asset-based methods. Minority interest and lack of marketability discounts can reduce the taxable value by 20-40%. Getting a proper valuation 2-3 years before any transfer is critical for defensible tax planning.