Evolving Estate Planning for Family Business Owners: Adapting to Life Stages and Growth

On April 30, 2025, Katten hosted Loyola University Chicago's Family Business Center for the "Family Business Through a Legal Lens" program. Private Wealth Partner Adam Damerow and Loyola University Chicago School of Law Professor Anne-Marie Rhodes presented the "Arc of Estate Planning for Family Business Owners" and addressed common estate planning evolutionary "Arcs" in a person’s life, including the Arc of the testamentary estate plan; the Arc of transfer tax (gift; estate; GST) planning; and the Arc of additional planning considerations faced by most families.

Estate Planning Through Life Stages

Attendees learned that estate planning for family business owners is a dynamic process that must evolve alongside the changing needs of entrepreneurs as their businesses and families grow. To illustrate, the presenters used a hypothetical scenario, in this case, that of a business owner. As a young entrepreneur with minimal wealth, a simple will is sufficient to avoid intestate succession (i.e., state laws that determine how a person’s assets will be allocated upon death). However, as the entrepreneur’s family grows and his or her business becomes modestly successful, adding a contingent trust for minor children and guardianship provisions in the will are recommended. When the business value increases, triggering estate tax exposure, creating a revocable trust can help avoid probate, provide continuity, and allow for the tax-efficient division of assets upon the entrepreneur’s death. At this time, lifetime planning strategies, such as making gifts and sales of business interests to irrevocable grantor trusts at discounted values, often make sense to reduce the taxable estate of the business owner.

Other Tax and Non-Tax Considerations

The presenters highlighted other estate tax considerations relevant to business owners such as lifetime gifting strategies (i.e., annual exclusion gifts), portability of a spouse’s unused estate tax exemption and life insurance planning. In light of the recent Supreme Court case Connelly v. U.S., reviewing current insurance structuring and buy-sell arrangements is encouraged. With respect to income tax planning, many business owners may want to consider domicile planning for themselves and/or their trusts to achieve significant income tax savings. 

Finally, the presenters emphasized the importance of non-tax considerations in an evolving estate plan. Understanding and being sensitive to family dynamics is key to successful estate and business succession planning. Regular family meetings and clear communication among family members can help address and resolve potential disputes. As a business and family grow, assembling a team of sophisticated advisers (i.e., business attorney, estate planning attorney, CPA, and wealth advisers) is crucial to ensure long-term success. Alignment and coordination among business, tax and estate planning advice makes for the best outcomes.