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Why a Will Alone Isn’t Enough of a Business Succession Plan


Passing a business along to another family member requires a lot of advance planning, and one of the more complex areas is managing the tax liability, as discussed in an article from NJ 101.5, “Should you leave a business in your will?” Heirs may find themselves facing a huge tax liability that, depending on the assets of the business and the heirs, could destroy or cripple the business’ ability to function.

The federal estate tax exemption is $5.45 million per person this year, plus any state exemption amount. That means if the business is generating some decent revenue, there’s a good possibility that estate taxes could hit after the parents are gone.

Just a third of all family businesses make a successful transition to the second generation because many issues can create obstacles. For instance, the interest of one family member may be different than other family members.

As part of this process, you should identify the successors, the active and non-active roles for each family member, and the additional support from family members needed by the successors.

Small family-owned businesses frequently will transfer shares of the business during the owners’ lifetime to address transfer tax consequences. These transfers can be structured so that the owners will keep control during their lifetime.

Business owners who wish to ensure that their business survives for the next generation would be wise to speak with an estate planning attorney who is familiar with the issues surrounding multi-generational businesses.

Reference: NJ 101.5 (June 15, 2016) “Should you leave a business in your will?

Why would we recommend D.T.F.? Several Reasons: Your ability to explain complex estate problems, clearly and patiently; your total lack of arrogance and pretense; a strong feeling that you are motivated by what you perceive is best for your client, rather than what would generate the largest legal fees; finally, and importantly, you are a lovely guy. A.C.

Two words cannot sum up the entire process of creating my “trust.” I enjoyed your attention to detail, your patience of explaining terms and conditions until I understood, also giving me copies to read and understand. Thank you for your suggestions on what was best for “me” but still allowing me to make my choice. Most of all, thank you for thinking of “me.” Wells Fargo said “you were the best” I cannot deny that. Again thank you very much for everything. Anna is an asset or a compliment to the firm. She is warm and very caring. It was great doing business. Thank you.