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Estate Planning

Most business owners think of estate planning as something they will get to eventually — after the next funding round, after the exit, after things slow down. That instinct is understandable and almost always wrong. The legal documents that govern what happens to your business when you die, become incapacitated, or simply want to step back are not documents you can put in place after the fact. By the time you need them, it is too late to create them. And the longer you wait to plan, the more limited — and expensive — your options become.

This section addresses estate planning from the perspective of business owners, founders, and executives: people whose most significant assets are often illiquid, complex, and deeply tied to their own involvement in a company. Standard consumer estate planning advice — get a will, name beneficiaries, set up a revocable trust — addresses only a fraction of what a business owner needs. The pages here go further, covering the full range of strategies that business owners, startup founders, and executives use to protect their companies, transfer wealth efficiently, and make sure that the businesses they built survive them. For context on how estate planning fits within the broader legal services available, see Practice Areas.

Working with an Estate Planning Attorney

Estate planning is not a do-it-yourself project for business owners. The stakes — both in terms of the assets involved and the tax consequences of doing it wrong — are too high. But that does not mean you should approach the attorney relationship passively. Understanding how lawyers bill, what an engagement letter should say, how the attorney-client privilege protects your communications, how to choose between a large firm and a boutique, and how to work efficiently with outside counsel are all skills that will serve you well not just in estate planning but across every legal matter your business encounters.

This section includes a series of pages on working with lawyers effectively — how billing works, what conflicts of interest mean in practice, when you need outside counsel versus in-house, what to tell your lawyer and why withholding information always backfires, and what legal documents every business should have in place from year one. These pages provide the foundation for engaging competently with legal counsel on estate planning and every other matter.

The Core Documents Every Business Owner Needs

A complete estate plan for a business owner includes several documents that work together. A will determines what happens to assets that pass through your estate. A revocable living trust — which founders with significant assets almost always need — allows those assets to pass outside of probate, remain private, and be managed according to your instructions if you become incapacitated before you die. A durable power of attorney names someone to manage your financial and legal affairs if you cannot. A healthcare directive and healthcare proxy address medical decisions. And for business owners, the operating agreement or stockholders’ agreement itself must be coordinated with these documents — because what your business governing documents say often overrides what your will says.

Beneficiary designations on retirement accounts and life insurance policies are particularly important and particularly easy to get wrong. These designations pass assets directly to the named beneficiary, outside your will and outside your trust. An outdated beneficiary designation — naming an ex-spouse, a deceased parent, or simply leaving the field blank — can undo years of careful planning in an instant.

Business Succession and Incapacity Planning

What happens to your business if you die or become incapacitated is not just an estate planning question — it is also a governance question. For closely held businesses with multiple owners, a buy-sell agreement is the essential document that answers it. A well-drafted buy-sell agreement establishes the price or pricing formula for a departing owner’s interest, identifies who can buy it and under what circumstances, addresses how a death or disability triggers the buyout, and specifies how the transaction will be funded — typically through life insurance or installment payments. Without a buy-sell agreement, a deceased owner’s interest may pass to heirs who have no relationship with the business, no expertise in running it, and no interest in cooperating with the surviving partners.

Incapacity planning — what happens to your business while you are still alive but unable to manage it — is equally important and more frequently overlooked. Voting trusts, springing powers of attorney, and carefully drafted operating agreement provisions can ensure that business decisions continue to be made even if the primary decision-maker is temporarily or permanently unable to act.

Wealth Transfer and Tax Efficiency

For business owners with significant equity — particularly those approaching a liquidity event — the federal estate and gift tax system creates both a major liability and a major planning opportunity. The federal estate tax exemption, historically generous under the Tax Cuts and Jobs Act, is scheduled to drop significantly at the end of 2025 under current law. Founders and business owners who have not used their exemption before that sunset may find that assets they could have transferred tax-free are now subject to a forty percent federal estate tax.

The tools available for transferring wealth efficiently include grantor retained annuity trusts, which allow founders to transfer appreciated stock at a low gift tax cost if growth exceeds a hurdle rate; intentionally defective grantor trusts used in installment sales of closely held stock; spousal lifetime access trusts that use the estate tax exemption while preserving some access to the transferred assets; dynasty trusts designed to benefit multiple generations without incurring additional estate or generation-skipping transfer tax; and family limited partnerships and LLCs that allow valuation discounts for lack of marketability and lack of control.

Qualified small business stock under section 1202 adds another dimension. Founders who hold QSBS that qualifies for the full exclusion may be able to exclude ten million dollars or more in gain from federal income tax on exit — but that exclusion does not automatically carry forward to the next generation. Coordinating QSBS planning with estate planning requires careful attention to how shares are held, transferred, and gifted.

Pre-Liquidity and Pre-IPO Planning

The window for meaningful estate planning in a high-growth company is narrow. Once shares have appreciated significantly, transferring them carries a high gift tax cost. The ideal time to plan is before a company’s value has been established by an outside round — when shares can be transferred at a defensibly low valuation, seeding a trust or a family entity with equity that will grow outside the founder’s taxable estate. Pre-IPO planning, which must happen before a lockup period begins and before the public market sets a share price, involves similar urgency and similar complexity.

Concentrated position planning — managing a large single-stock position after an IPO or acquisition — involves its own set of legal and tax strategies, including charitable remainder trusts, exchange funds, and collared monetization structures that can reduce risk without triggering an immediate taxable sale.

Special Situations

Several circumstances require specific estate planning attention that general planning guides do not address adequately. Founders with assets in multiple countries face an international estate planning landscape that involves treaties, foreign forced-heirship rules, and the interaction of U.S. estate tax with foreign inheritance regimes. Business owners going through divorce need to understand how prenuptial agreements, trust design, and business valuation interact with marital property law. Retirement plan assets after the SECURE 2.0 Act follow distribution rules that affect how those assets should be coordinated with the rest of an estate plan. And digital assets — cryptocurrency, NFTs, and online accounts — present both technical and legal challenges for executors and trustees that traditional estate planning documents do not anticipate.

What This Section Covers

The pages in this section are written for business owners who want to understand their options — not just receive a checklist of documents to sign. Topics include wills and trusts, probate avoidance, powers of attorney and healthcare directives, beneficiary designations, buy-sell agreements and their estate tax treatment, incapacity planning, working with outside counsel, GRATs, IDGTs, SLATs, dynasty trusts, family limited partnerships, QSBS and estate planning, carried interest, section 1061, pre-IPO estate planning, concentrated position planning, charitable strategies, retirement plan planning under SECURE 2.0, international estate planning, divorce and the estate plan, digital assets, and the TCJA exemption sunset. Each page explains the legal framework and the practical decisions that business owners actually face, in plain language without unnecessary jargon.

See Also

Working with a Lawyer

Founder Estate Planning Basics

Advanced Founder Estate Planning

For an overview of all legal practice areas, see Practice Areas.