facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
%POST_TITLE% Thumbnail

MCF Insights: An Estate Planning Primer for Business Owners

Business owners have enough responsibilities when it comes to managing their business and personal finances. There is one particular aspect of their financial lives that is often neglected until it’s too late, and that is the management of their estate. However, it is the one area of their financial picture that, if not thoroughly planned and managed, could have the most devastating consequences for their family and their business.

After spending their lives building a successful business, it’s not at all uncommon for the value of the business to comprise the vast majority of a business owner’s estate. Many business owners would like to see their business remain in the family after their death or have their family be able to benefit financially if the business is sold. Without a well-conceived estate plan, with full consideration of the business as an estate asset, there is a high likelihood that the business will not survive an estate liquidation to cover settlement costs and taxes.

It takes a well-conceived estate plan, with special consideration for a business owner’s intent—either as an ongoing concern or as a source of capital for his or her family—to ensure it remains intact upon the business owner’s death. In addition, a sound estate plan will ensure a smooth transition and maximum benefits for the family.

A proper estate plan  can help establish all of the following benefits:

  • Ensure that your wishes are honored when you are unable to manage your own affairs.
  • Communicate your wishes and expectations precisely to your family and heirs
  • Ensure a continuous stream of income for the family
  • Provide capital to meet the immediate cash needs of the family
  • Provide the capital needed to keep the business operating
  • Facilitate the timely distribution of assets by avoiding probate proceedings
  • Minimize estate taxes and other costs
  • Eliminate family tensions in the ongoing operation of the business
  • Keep the settlement of the estate private by avoiding probate
  • Preserve estate assets for the benefit of future generations.

Estate Planning Solutions for Business Owners

Depending on the value of the business and the owner’s intent for its disposition, estate planning for business owners can require much more than a simple will. Every situation is different; however, most business owners can benefit from several of these additional estate planning tools:

Revocable Living Trust: When business ownership is transferred to a revocable living trust, the business asset is not included in the probate estate, thereby eliminating the cost, delay, and publicity of probate proceedings.

Irrevocable Life Insurance Trust: When a business comprises a large portion of the estate, the estate will need capital in order to pay the estate settlement costs and taxes to prevent the liquidation of the business. Life insurance is the most efficient way to accomplish this, and when it is held in an irrevocable life insurance trust, the proceeds will not be included in the estate.

Unified Credit Trust: Sometimes referred to as a Marital Trust, a Unified Credit Trust ensures that each spouse maximizes the unlimited marital deduction allowed under the tax code. In addition, a business held in the trust is protected from creditors.

Business Continuation Plan: Businesses need a plan in place to ensure the business can continue in the event of the death of a partner or shareholder. A business continuation plan is typically funded by life insurance on each of the partners, so that, at their death, funds are available to buy out their surviving family members.

Business Succession Plan: All business owners who intend to transition out of their business should have a business succession plan which should be coordinated with their estate plan to ensure continuity of the business and financial security for the family.

“Estate, tax and succession plans are moving targets,” states Consultant Jeff Jennings. “The best plan can go stale, which is why MCF keeps all documents and reviews for opportunities every year.”

Business owners spend a lifetime investing energy, equity, and money in their enterprise, many with the hope of having their family and future generations benefit after they’re gone. The only way to ensure that happens is with an estate plan specifically designed for business owners.

Consult a financial advisor to discuss how proper estate planning can protect you and your family. Contact us to connect with a financial consultant.


Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by MCF), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from MCF.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  MCF is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice.  A copy of the MCF’s current written disclosure statement discussing our advisory services and fees is available upon request. If you are a MCF client, please remember to contact MCF, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services.