Estate Planning for Business Owners – One of the main objectives of a comprehensive estate plan is to ensure a seamless transition of your assets to your beneficiaries when you pass away. For most of our clients, this means setting up revocable trust and “funding” the trust with your personal residence and bank accounts (changing title on those assets from “Rafael Ruano” to “Rafael Ruano, Trustee of the Ruano Family Trust”).

So, what does this have to do with business owners? For business owners, their business is one of their largest assets. At the same time, since most businesses in America are small entities, these are not the easiest assets to transfer upon death. To be clear, the technical transfer of a business entity from a business owner to their beneficiary can be accomplished using a revocable trust and transferring the owner’s interest to their revocable trust. Upon death, the successor trustee can “take control” of the business entity and then make decisions with regards to the business, subject to the instructions in the revocable trust.

Transferring a business interest into a revocable trust is not a one size fits all solution, however. Depending on the business structure, the existence of other owners, and specialized contracts, such as franchise agreements, that are tied to a specific person, determining the proper way to deal with a business interest after the owner’s death requires at least a conversation with your estate planning team. At the very least, every business owner should consider the impact of their death on their businesses, and, in most cases, they can make arrangements to minimize disruption to their partners, employees, customers, and family/beneficiaries.

An especially tricky issue is that much a business’ value and ability to continue operations can be tied to the owner’s ability to keep working in that business. A solo professional practice may own some assets, but its value to a potential buyer mostly evaporates should the professional pass away. Commercial businesses, depending on their business model, will vary in impact depending on the day-to-day involvement of the deceased owner. Depending on the situation, proper planning may include implementing a succession plan for the business to try to affect a transition while the owner is still alive and possibly increase and/or secure the value received for the business.

A successful business succession plan, whether to an existing partner, a family member or third party, should take into consideration a number of factors: tax implications, contractual and licensing requirements, valuation, transition of key client relationships, business entity type, and a practical assessment of the time and effort required to implement the transition. Needless to say, the longer the time frame to plan and implement a succession plan, the likelier it will succeed.

If you own a business and would like to consult with Caitlyn Andrijich or Rafael Ruano about your plans and goals for your business assets, give us a call at (916) 851-1900 or email to