Family Business Legacy Planning

The Family Business: Leaving a Legacy

In Part 1 and Part 2 of our series on Building a Future For Your Family Business, we highlighted the importance of succession planning for family business owners as well as exit planning options for owners, including both family- and non-family (M&A) considerations.

In our third and final part below, we examine opportunities for family business owners to leave legacies for their families.

To download the complete whitepaper, click here.

Whether the future of a family business depends on the next generation or the family cedes ownership to an outside party, it is essential to develop and kindle a financial legacy while the business remains under its current ownership. For a family business owner or operator, that includes relying on the use of sophisticated and strategic tax planning and building an estate plan that accounts for the financial future they want for themselves and future generations.


By transferring assets into a trust, a business owner can reduce his/her taxable estate AND setup future generations for financial success. At a high level, here are a few reasons a family business owner may want to consider a trust:

  1. Tax Savings. For an owner, the family business likely represents a significant portion of the family’s wealth, which means transferring those assets into a trust presents an opportunity to sizably reduce what are considered taxable assets.
  2. Probate & Creditor Protection. Unlike wills, which can be contested in court, trusts hold much more stringent properties and are less likely to be disputed or overturned in court.

There are also a number of different types of trusts to consider when conducting succession planning. For example, with a Grantor Retained Annuity Trust (GRAT), a business owner can transfer property to a trust, but retain a right to annuity payments for a specified number of years. After the trust term ends, the annuity payments stop, and the remaining trust property passes to the person(s) named in the trust as the remainder beneficiaries. Alternatively, the property can remain in trust for their benefit. The value of the gift of the remainder interest is discounted for gift tax purposes to reflect that it will be received in the future.

Another option to consider is a Charitable Remainder Trust (CRT). With a CRT, a business owner can set up beneficiaries with future income, and at the end of the trust period, the remaining balance is passed on to a charity.

Depending on your business and families’ circumstances, there are a number of other trust options to consider with varying tax implications. If this is of interest, we recommend you connect with your tax advisor to discuss the best option for you.

Wealth Management

Regardless of whether you opt to leave your business to a family member or sell to an outside party, you’re likely going to come into a windfall that you’ll want to be prepared for. An important step in your exit plan should also be developing a personal financial plan that takes into account your individual goals (e.g. comfortable retirement, new purchases, future travel, etc.) and establishes a strategic blueprint for managing your finances.

Be sure to speak with your financial advisor to review your goals and design a plan that suits your needs.

Through this combination of proactive estate and wealth planning, business owners can better position themselves and their family’s next generation for a successful financial future.

Other Items to Consider

In addition to building a succession plan for your business and a financial plan for yourself, your children or other family members, don’t forget to think through other areas that could impact your professional or personal future, including:

  • Legal Considerations: Depending on your entity type and/or industry, are there legal implications to your business being sold and to whom?
  • Life Insurance: Do you have an existing life insurance policy that may affect how you want to pass on your business and create wealth for future generations?

Ultimately, as you look to create a legacy for your business and family as well as provide retirement security for yourself, you’ll want to think closely about the factors most meaningful to you and review them comprehensively with your business and personal financial advisors.

MFA is skilled at partnering with family business owners and their families to explore future opportunities and design strategies to achieve individual outcomes. At whichever stage your business lies, we can help implement organizational and financial strategies in alignment with both business and personal objectives. Please contact us to discuss your family’ objectives.

Family Business Whitepaper

Timothy Hole

Director of Financial Planning

Connect with Tim

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