Blog Post Sponsored by McGill Junge Wealth Management
Author: Trent Burley – Private Wealth Advisor at McGill Junge Wealth Management
We often hear some variation of two major questions from owners of closely held businesses:
- With most of my net worth tied up in the business, how do I protect and grow its value?
- How do I make sure what’s been built benefits my lifestyle and my family without giving too much away in taxes?
Answering these questions involves a strategic process of preparing the owner, the business, and the family for what comes next. Whether the goal is a family succession, internal sale to the management team or employees, or a sale to a strategic or private equity buyer, the most successful ownership transitions start early, build a plan, and align their estate strategy with the future of their business.
This article outlines how leaders can prepare for that transition through value acceleration, succession planning, and structuring the estate before a transaction—so that the wealth built over a lifetime becomes an enduring legacy for generations.
Start With the End in Mind: What Are You Actually Solving For?
Every business transition—family or third party—begins with clarity on two key considerations:
Your lifestyle needs after the exit
- How much income do you need after taxes, including the impact of inflation and longevity?
- What other assets besides the business do you have?
- What would financial independence look like if the business transitioned tomorrow?
Your legacy vision
- Who should benefit from the wealth you’ve created?
- Do you want to equalize among children, or empower the ones active in the business?
- What do organizations or causes do you want to benefit with your family philanthropy?
Before any tax strategies, trusts, or buy-sell agreements are drafted, these key considerations should create the foundation for these strategic decisions.
Most owners discover that their company is 70–90% of their net worth. That means the exit plan and the estate plan are not two separate conversations—they’re the same plan seen from two different vantage points.
Family Successions: How to Ensure the Business—and the Family—Stay Intact
Transitioning the business to the next generation is a powerful legacy strategy, but it requires aligning:
- A capable successor
- A fair inheritance
- A financially secure retirement for the founder
- A smooth transition inside the company
- A structure that protects the family from future creditors, divorces, and disputes
Identify and develop the successor early
True succession starts years before ownership transfers. It involves hands-on leadership training, clear performance metrics, and formal authority shifts—not just informal planning.
Create inheritance fairness without forcing equal ownership
Not all children need to own equal shares of the company, but all children should feel fairly valued. Strategies that can help:
- Voting vs. non-voting equity
- Life insurance equalization strategies
- Family LLCs and trusts that separate economic benefit from operational control
- Buy-sell agreements that set clear rules
These structures ensure that the successor can lead without interference—and siblings receive fair treatment without being burdened with an asset they don’t want.
Pre-transaction estate planning creates tax leverage
If the business is expected to grow under the next generation, transferring ownership before that growth happens may reduce future estate tax exposure dramatically. Strategies that can help with this:
- Grantor trusts (IDGTs)
- Family limited liability companies (FLLCs)
- Gift and sale with promissory note strategies
- Life insurance for tax liquidity
The key is timing: estate strategies must be implemented well before the transaction, not during it.
Preparing for a Sale to an Outside Buyer
Selling a majority or minority interest to a strategic buyer or private equity sponsor requires a different type of readiness. While successions are about continuity, third-party sales are about maximizing transferable value.
Make the business less dependent on the owner
Buyers pay more for companies with:
- Strong management teams
- Documented processes
- Clean financials
- Minimal customer concentration
- Predictable EBITDA
- Incentives for key employees to stay (ex. LTIPs or SERPs)
If your business relies heavily on your relationships or institutional memory, value is trapped inside your head rather than inside the company.
Prepare the business for due diligence before a buyer ever sees it
Reverse due diligence—conducted by the owner and advisors—identifies and fixes issues ahead of time:
- Contract reviews, operating agreement and buy-sell updates
- Tax exposure
- Corporate structure cleanup
- Clean financials
- Documentation of backlog, pipeline, and bidding processes
- Key employee retention plans
Align the estate plan before the LOI—not after
One of the biggest mistakes owners make is waiting until after they sign a Letter of Intent to consider estate planning. By then, the valuation is “locked in” for tax purposes, and the IRS can challenge last-minute transfers as “step transactions.” Owners who engage in estate planning early can:
- Freeze the value of the business for estate tax purposes
- Transfer future appreciation tax-efficiently
- Protect assets in trusts before the liquidity event
- Leverage life insurance and charitable strategies for impact and tax reduction
Integrating the Exit Plan and the Estate Plan
Ultimately, the exit is not just a financial transaction; it’s an identity shift, a family turning point, and the creation of a new chapter.
The most resilient families and companies think of exit planning and estate planning as two integrated strategies:
- Protect: Safeguard the family, the business, and the legacy from taxes, creditors, and disputes.
- Grow: Increase the company’s EBITDA, multiple, and transferable value.
- Transfer: Ensure the wealth and leadership transition smoothly—either to the next generation or to a buyer.
Final Thoughts
Your business is likely the largest investment you will ever own. The exit—whether inside the family or through a sale—deserves the same level of intentionality you brought to building it.
- Planning early gives you leverage.
- Planning thoroughly gives you options.
- Planning with a coordinated exit and estate strategy gives your family a legacy.
When done right, your exit can be more than a transaction. It can become the moment your life’s work begins to benefit future generations.
To explore more about integrating business, personal, succession and exit planning, email trent.burley@nm.com or visit www.mcgilljunge.com. This article is provided for educational purposes only and is not intended as legal or tax advice.
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