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Estate planning for business owners: a will or trust is just the start of your ultimate plan

Ron Adams • November 14, 2022

Our list of often-overlooked questions can help you strengthen your business succession planning and ensure a solid future for your spouse and children.

Ron Adams

By Ron Adams


No two business owners start their company with exactly the same objectives and motivations. But regardless of their initial purpose, whether their intention is to perpetuate the business for future generations or to achieve an orderly transition of their business to someone who will effectively run, sell or liquidate it, at some point it becomes necessary to come up with a plan.


That plan must include some provision for what happens if your company outlives you. Without a succession plan as part of, or in addition to, your estate plan, a major asset and source of your family’s wealth could be in trouble.

An 800-word article cannot begin to address all of the scenarios, options and decisions that may apply to your personal and business situation. Instead, we offer a few (OK, more than a few) questions that, thoughtfully considered, might provide a useful start in formulating plans for your business’s ownership and operations in case you should die while still running the show.


Consider questions such as these:


  • Are you married or single?


  • If you are married, is your spouse involved in the business?


  • Do you live in a community property state (such as Arizona) or a separate property state?


  • Do you have children? Are any of them involved in your business?


  • If you want the “involved” child to run or own the business after your death, how will you ensure equal or equitable treatment of your involved and uninvolved children?


  • If the business would need to be run by a key employee or other non-family member, have you identified and prepared that person to assume operational control?


  • Can the business afford to pay a manager who can run it as effectively as you?


  • How would you ensure that your spouse or children receive income from the business?


  • If there are no obvious successors to manage your business, what provisions should you make for its continued operation, sale or liquidation?


  • How is your business owned? Is your business interest owned directly, or is it held in a Trust? Are your business interests and personal assets held in the same Trust?


  • Is it a sole proprietorship (Schedule C taxpayer)? Where will the business go after you die? Is it subject to probate? If you are married, is your spouse willing and able to continue running the business, or would the business need to be sold or liquidated? If it is to be sold or liquidated, how will it be operated, and who will operate it, until that can happen?


  • Is it a single-member LLC? Who is the “member” – you only, your marital community (i.e., you and your spouse), your Trust?


  • Is it a multi-member LLC? Are the other members family or non-family? Does it have an operating agreement? If so, does your operating agreement address what happens to a member’s ownership interest when they die? Are there buy-sell provisions in the operating agreement that would allow (or force) the other members to buy your interest from your spouse, Trust or Estate? Are those buy-sell provisions adequately funded (by insurance, member contributions, etc.)? How is the value of your interest to be determined? If there are no buy-sell provisions in your operating agreement, or you have no operating agreement, what is to keep a deceased member’s spouse or children from taking the decedent’s place at the “table”? Are your fellow members in the LLC OK with that?


  • Is it a partnership? How many partners do you have? Do you have a partnership agreement and, if so, does your partnership agreement address what happens to a partner’s ownership interest when they die? Are there buy-sell provisions in your partnership agreement?


  • Is it a corporation? Is it a C corp or an S corp? Who owns the stock in the corporation? Are there other shareholders? Is there a buy-sell or shareholders agreement that addresses what happens to a shareholder’s stock upon his or her death? Do you have a board of directors that would make company decisions in your absence?


  • If your business has multiple owners, are there any conflicts between the business’s governing documents and your personal estate planning documents regarding how your interest will be conveyed, and to whom?


  • Would your death create an estate tax liability? How would the tax be paid (cash, life insurance, business liquidation, etc.)?


  • Would your death trigger any contingent liabilities to commercial creditors, i.e., the ability of a lender to call a loan? If your business has outstanding loans, your death will likely trigger default provisions in the loan documents, including any personal guarantees. How would the debts be paid?


See also: No conflicts: Coordinating your LLC operating agreement with your personal estate plan


The questions could go on indefinitely, but perhaps we’ve made our point – i.e., for business owners, estate planning does not end with a Will or a Trust. That is just the first step.


The process ends when you feel confident that you have considered every important eventuality, and, with the help of an experienced business lawyer and estate planner, created a business succession plan that will either preserve your company as a source of wealth and income or replace its value for your family’s benefit.


To start the discussion, contact Ron Adams or Ryan Scharber at 480-345-8845.

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