EP Wealth’s Dallin Cutler, CFP^®, shares how business owners can align succession planning with estate strategy to manage taxes, liquidity, and legacy goals. 

Integrating Your Business Succession Plan into Your Estate Strategy

In my experience, business succession and estate planning are often treated as separate conversations—when in reality, they’re deeply intertwined. Each one needs to be viewed through the lens of the other, and one of our key roles as financial advisors is to help clients step back and see that full picture.

A big part of the value we bring is that we’ve been through this process with other business owners. We can explain the financial and tax consequences of each decision and help evaluate the best-case scenario, worst-case scenario, and everything in between.

Frankly, this kind of complex planning is one of the main reasons clients work with financial advisors in the first place. It requires input from attorneys, CPAs, valuation experts, and others, but where we often make the most difference is in bringing those voices together. We’re the quarterback. Estate attorneys or CPAs might see themselves in that role—and they’re certainly driving important parts of the process—but I believe advisors have the most visibility into the client’s full financial life. That’s what makes us well-positioned to guide the strategy in a way that best reflects their long-term goals.

In this blog, I’ll walk through five areas to consider:

• Choosing how you want to exit the business
• Using financial structures and vehicles to manage estate tax
• Timing considerations that affect major decisions
• Balancing the needs of heirs involved in the business and those who aren’t
• Planning for liquidity to support heirs and preserve your goals

What Happens When You Treat Business Succession and Estate Planning Separately

One common issue I see is when a client has a clear plan for transferring ownership of the business, but hasn’t given any thought to estate taxes or how to provide an equitable inheritance for heirs who aren’t involved in the business. Sometimes we see good succession planning, but no estate planning around it. And that can lead to problems later.

There’s also the risk that something unexpected happens—like the death or incapacity of the owner—before the transition is complete. When there’s a lack of coordination between the operating agreement, the buy-sell agreement, and the estate plan, you can end up with ownership transfers the client didn’t intend, disputes among beneficiaries, or even a liquidity crunch at exactly the wrong time.

Considerations for Aligning Succession With Your Estate Plan

#1: Define the Type of Sale and Your Role After It

The first step is figuring out how you want to sell or transfer your business. I let the client lead here. My role is to help lay out the tax, financial, and estate implications of each possible direction. I often describe this as a CEO-CFO relationship: the client acts as the CEO, with the vision and goals, while I provide the financial perspective and help build a path forward.

Some of the key questions we walk through include:

• What are your goals and legacy intentions?
  Some owners want to pass wealth to their children. Others don’t, either because they don’t think it would be healthy for their kids to have so much money at their disposal, or because they want to place limits around access. These preferences shape the structure and timing of the transition.
• Will the proceeds from a sale support your lifestyle?
  If you’re selling to a third-party, you’ll likely get a firm valuation. We need to look at whether that number provides the income needed to support your goals after the transition.

• How involved do you want to be after the sale?
  If you’re selling to a third-party, such as another business or a private equity group, you’re often required to stay on for a year or more. These buyers typically want a smooth handoff. With internal transitions to employees or family members, you may have to stay involved even longer. That’s because the new leadership may rely more heavily on your guidance during the transition.
• Is the successor financially and operationally ready?
  Internal buyouts often happen over time, because successors may not have the capital to purchase the business outright. This can increase the owner’s risk if the payments depend on future business income. The shorter that transition period, the lower the risk. For example, a 3- to 5-year payout period is usually more manageable than a longer-term arrangement.

How advisors support the transition:

• For family transitions, we assess interest, competence, and fairness among heirs.
• For internal sales, we help explore tools like ESOPs or seller-financed buyouts.
• For third-party transactions, we coordinate with valuation experts, CPAs, and attorneys to review different sale scenarios and what each could mean for the owner’s estate plan.

#2: Use the Right Financial Vehicles to Manage Estate Tax Exposure

Many business owners will eventually face estate tax exposure. For 2025, the federal estate and gift tax exemption is $13.99 million per person, or $27.98 million for a married couple using portability. That’s the starting point. Those exemption limits are scheduled to drop in 2026, though it’s possible that Congress will act to extend them.

If a client’s estate is projected to exceed those amounts, the question becomes: what do we do about it?

One common strategy is to move assets out of the estate while they’re still appreciating. If a business is expected to grow significantly, transferring a portion of it early means that the future appreciation can occur outside of the estate. This can potentially reduce the estate’s taxable value and create more flexibility for future generations.

That said, these strategies often involve irrevocable decisions. You typically give up control of the asset by placing it into a trust. That’s why we bring in estate attorneys to walk through the nuances and help decide whether the trade-off is worthwhile.

Some of the more common tools we consider include:

• GRAT (Grantor Retained Annuity Trust):
  Moves assets out of the estate, while paying a fixed income back to the grantor for a set number of years. Any appreciation that occurs beyond that income stays outside the estate.
• SLAT (Spousal Lifetime Access Trust):
  One spouse creates the trust and the other can access the funds. This works best for couples in a strong marriage, since the access is not equal if the relationship changes.
• IDGT (Intentionally Defective Grantor Trust):
  Allows the owner to freeze the value of an asset through a sale, while allowing future growth to occur outside the estate.
• FLP (Family Limited Partnership):
  Often used with real estate or other hard-to-value assets. The business owner holds the controlling interest and transfers limited shares to beneficiaries. Because the assets are illiquid and hard to value precisely, the IRS permits discounts, which can make it possible to transfer more while using less of the exemption.
• ILIT (Irrevocable Life Insurance Trust):
  Used to create tax-free liquidity to help heirs manage estate tax or transition costs after the owner’s death.

Key Areas Where Succession and Estate Strategies Intersect 

• Ownership Transfer -Who gets the business and when
• Tax Exposure -Estate taxes and valuation impacts
• Liquidity Needs - Access to cash for heirs or buyouts
• Family Dynamics - Balancing business and non-business heirs
• Legal Structures -Trusts, buy-sell agreements, share classes

#3: Timing Can Make or Break the Plan

The timing of these strategies can be really important. I often talk with business owners about not just what steps to take, but when to take them. This is especially true when growth, valuation, or tax law changes are on the horizon.

Estate freeze techniques

If your business is worth $10 million now and expected to triple in the next five years, it may be better to move some of it out of your estate now rather than later, before it grows beyond the exemption limit. This approach is often called an “estate freeze” because it locks in the current value for estate tax purposes, allowing future appreciation to occur outside the estate. But there’s a risk in that as well. If the growth doesn’t materialize, you may have made an irrevocable move without much benefit.

Gift or sale strategies

We often talk to clients about timing from the perspective of valuation. Gifting or selling ownership when the business is valued lower—or when minority discounts can still be applied—may reduce the tax impact of the transfer.

Align succession planning with estate exemption timing

There’s also a timeline issue around the federal exemption. If it drops in 2026 as scheduled, some clients will lose the window to shift larger portions of their estate. That’s one reason we talk about aligning estate strategy with both growth expectations and the legislative environment.

Timing liquidity events

Finally, we help plan the timing of liquidity events, especially for clients whose businesses are illiquid. If you wait too long, and your heirs don’t have cash available to cover estate taxes or buyouts, it can lead to forced sales or conflict among beneficiaries.

#4: Balancing the Needs of Heirs Inside and Outside the Business

When a business is passed on to some but not all children, estate planning becomes more complicated. Some heirs may be active in the business; others are not. We use tools like:

• Voting vs. non-voting shares to separate control from ownership
• Trusts to divide beneficial ownership from management
• Life insurance to provide liquidity to non-business heirs

I also encourage regular family meetings. Even if everything is documented legally, the family should understand the ‘why’ behind the plan. That transparency goes a long way toward managing future tension.

#5: Make Liquidity Part of the Strategy

Liquidity is often discussed in terms of taxes, but that’s not the only reason it’s important. Heirs may need time to settle the estate, manage transitions, or meet other obligations. Without liquidity, they may be forced to sell assets or borrow against the business.

Some of the ways we address this include:

• Funding ILITs to create cash outside the estate
• Buy-sell agreements with funding already arranged
• Side accounts or cash reserves inside the business to help cover obligations after the owner’s death

For example, we might ask: Does the business have enough cash reserves to buy out the owner’s interest so that money can then be passed on to heirs? That kind of question is easy to overlook until it becomes urgent.

We Bring Professionals Together

To wrap up, I’ll go back to the idea of the advisor as the quarterback. We’re looking at this from the client’s perspective. We know their tax picture, their estate structure, their business, and family dynamics. And we’ve spent enough time with them to know what they want to happen if something unexpected occurs.

In this kind of planning, there are always competing interests. Estate attorneys may lean toward creating new trusts or restructuring the business because that’s their job, and often it’s a good idea. But sometimes I’ll say, I don’t think we need to rush into that decision. Maybe this isn’t the right time for something irrevocable.

I recognize that advisors, too, can bring their own biases to the process, such as favoring early liquidity because it means more money for them to work with. Ultimately, it’s not about pointing fingers; it’s about being aware of these dynamics and helping manage them in a way that keeps the client’s goals always at the center.

That’s the role we play: bringing in experienced professionals, creating space for healthy debate, and working towards a plan actually works for the person it’s designed to serve. 

Contact us today to learn more about our services.

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