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Family Business Succession Planning

Posted 5 years 56 days ago ago by Danielle Streed

When it comes to setting up a living Trust, it is important to make sure that the Trust is funded.  Funding includes the transfer of assets such as your bank account, your home or your investments in to the name of the Trust or updating beneficiaries so the assets pass into the Trust at the time of your death.  Some assets and investments need further review to determine whether transferring the assets into the Trust is appropriate.  One such asset would be a family owned business.  In some situations a family business may merely be a DBA (doing business as) or a sole proprietorship or a single member LLC.  In those situations, it may be appropriate to transfer the business and/or business accounts and or the DBA in to the Trust so that the Trustee can wind down the business.  However, when there is a more involved family business, such as a partnership or corporation and there is a small group of owners/managers, transferring ownership into the Trust may not be appropriate and it may not be allowed under the operating agreement.  When it comes to business succession planning, in many cases the planning may need to be handled outside of the Trust with the corporate attorney.  The operating agreement may provide that upon a business owners’ death, his or her interest must automatically pass back to the business or it may provide that the other business owners have a first right of refusal.  It may prevent ownership passing to anyone other than a family member.  When it comes to planning your estate, if you are involved in a small business it is important that you review the operating agreement to make sure that you do not violate the terms of the agreement.  It is also important that you communicate this information with your successor trustee.

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