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Estate Planning for Business Owners, Executives, and Professionals

Estate Planning for Business Owners, Executives, and Professionals

August 09, 2021

By Rick Hellberg, ChFC®, CLU and Michael Diaz

Estate planning is especially important for business owners, executives with a keen interest in the business, and those with assets to pass on. Making your wishes known through a will or trust is best to ensure your assets are appropriately distributed per your wishes.  

Without proper estate planning, this responsibility will fall to the State, which can lead to a handful of delays and your business or possessions landing in the hands of someone other than who you had in mind. Beyond proper designation, goals of estate planning include minimizing taxes and appointing guardians to minors.

Legal Terms Associated With Estate Planning

While designating beneficiaries and tax strategies are high-level concepts, the verbiage used throughout estate planning can create confusion if you don’t take the time to educate yourself. Here are a few common terms and definitions.

Power of attorney: A POA will act as an agent and make decisions on your behalf. You may want a healthcare power of attorney to make medical-related decisions when you’re unable. You can also appoint a financial power of attorney to make financial and business-related decisions.

While appointing a POA to make business decisions is smart, if you appointed your spouse as your POA, they will not be able to use business assets for their own benefit. This means your spouse cannot pay themselves in the same manner you would have. This is where a trust or will comes into play to transfer ownership.

Trust: A trust is a relationship between a trustor (or grantor), trustee, and beneficiary. The grantor puts assets into the trust and the trustee manages and oversees the assets. The trustee is obligated to act in a fiduciary manner. The primary goals of a trust are efficient transferring of assets to a beneficiary and to minimize taxes. (1)

Will: A will communicates an individual’s wishes and aids in dispersing assets to beneficiaries upon their passing. There are varying forms and purposes for wills.

Estate: An estate is a sum of all wealth, assets, and property. (2)

Taxes to Consider for an Estate Containing a Business

As a business owner, your estate will include the value of your business at the time of your passing. Estate taxes vary by state; if an estate tax applies, the sum of your estate includes the value of your business.

It’s important to understand that estate taxes come with thresholds. As your business grows, the tax implications may increase. Until December 31, 2025, your estate valuation must be over $11.7 million before it’s subjected to a federal estate tax. After January 1, estates over $5 million (adjusted for inflation) will be subject to federal estate taxes. (3) At the state level, some charge an estate tax while others do not.

When it comes to your estate value, here are other points to remember:

  • A life insurance payout is part of your taxable estate. Yes, insurance isn’t usually isn’t taxable for income taxes, but any insurance you own is estate taxable.
  • If you designate a charity to receive a percentage of your estate, your state will conduct an appraisal to assure the charity receives the proper donation amount.
  • Assets in retirement accounts are often taxed in the future when the beneficiary makes withdrawals and will be fully included in calculating your taxable estate, resulting in potential double taxation.

Minimizing taxes and estate planning go hand in hand. To get your wheels turning, here are two examples of tax-minimizing options for business owners:

  • Utilizing a trust. In the case of an irrevocable trust, once a trustee places assets into the trust, those assets no longer belong to the individual’s estate. This decreases the trustor’s total estate value. (4) Lowering one’s total estate value lowers their total estate tax (should one apply).
  • Utilizing a family limited partnership (FLP). An FLP allows multiple family members to buy shares of the businesses. One goal is to preserve wealth over time to provide for future generations through tax-free transfers of assets. (5)

Executives With Interest in the Business

Without proper planning, the State is left to determine how assets are dispersed. In this instance, ownership of the business often falls into the hands of a spouse or children. In reality, many want to pass their business on to a high-level executive or co-owner with an interest in the business. 

For this reason, many prepare a buy-sell agreement, which predetermines the passing of your business on to a new owner. This helps avoid the business inadvertently falling to a family member. (6)

Executives often receive compensation in forms other than a paycheck. This means the terms of the agreement need to be clear and regularly reviewed. Businesses and relationships evolve; you want your buy-sell agreement to remain fair and current.

Another common scenario is when a business owner wants ownership to remain within the family, but the family member is not best suited to handle day-to-day operations. In this instance, you can declare ownership to one individual and management responsibilities to another. (7)

You put countless hours and resources into your business, so it needs to live on in a manner that best honors you. Whatever the situation may be, you want to have confidence that you’re setting up future operations for success. 

Estate Planning With PeterAlexander

Assuring your affairs are in order is no easy task. But as you can see, proper estate planning minimizes taxes, reduces stress, and saves time for those managing your estate. 

At PeterAlexander, we’ve taken a special interest in serving clients beyond wealth management and retirement planning. As a Chartered Financial Consultant and Chartered Life Underwriter, we’re uniquely qualified to create a plan that encompasses you, your family, and your business.

To learn more about our comprehensive advisory services, reach out to us at 610.940.1441 or info@peteralexanderinc.com.

About Rick

Rick Hellberg is president and CEO of PeterAlexander, a financial planning firm founded in 1991. Rick is passionate about providing quality, objective financial solutions so his clients can pursue their financial goals and create the legacy they desire. He strives to equip his clients with comprehensive financial services and advice so they can be empowered to make sound financial decisions. The plans Rick and his team develop help their clients to reduce their taxes, educate their children, fund their retirements, pass their businesses on at fair value, and create programs to attract and retain valuable employees, all so that they can focus on what matters most to them. Rick has a Bachelor’s degree in Liberal Arts from Penn State, along with the Chartered Financial Consultant® (ChFC®) and Chartered Life Underwriter (CLU) designations. He has spent over 40 years working with successful individuals and designs tailored solutions to meet his clients’ unique needs. 

Rick resides in Philadelphia with his lovely wife, Lisa, and their two Shiloh Shepherds, Bentley and Winston. He is also the very proud father of two wonderful young men, Peter and Alex. In 2010, Rick ran for Congress in the 2nd District of Pennsylvania and has stayed active in local politics. To learn more about Rick, connect with him on LinkedIn.

About Michael

Michael Diaz is a financial advisor at PeterAlexander with over 15 years of industry experience. Michael is passionate about helping people overcome financial challenges and avoid potential pitfalls so they can focus their time and energy on the most important things in their life. He spends his days working with successful business owners and families, implementing investment and tax reduction strategies to maximize their wealth. Michael’s goal is to help protect his clients’ financial security, putting them first and helping them navigate every stage in their financial journey. Michael earned his Bachelor of Science in Commerce and Engineering from Drexel University. When he’s not working, you can find Michael traveling, cheering on local sports teams, and exercising outdoors. Michael loves spending time with his wife, Abby, and their baby girl, Monroe. To learn more about Michael, connect with him on LinkedIn.


(1) https://www.investopedia.com/terms/t/trust.asp

(2) https://dictionary.law.com/Default.aspx?selected=661

(3) https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax

(4) https://www.thebalance.com/best-ways-to-protect-your-inheritance-from-taxes-4178488

(5) https://www.investopedia.com/terms/f/familylimitedpartnership.asp

(6) fidelity.com/life-events/estate-planning/asset-strategies/own-business

(7) https://www.actec.org/estate-planning/estate-planning-considerations-for-small-business-owners/