By Michael Rawls, Senior Partner
As a business owner, you’ve worked hard to build something meaningful—whether it’s a family-run operation or a company you hope to see thrive for generations. But what happens to your business when you’re no longer around? Estate planning is the process that allows you to preserve your legacy, allowing for business continuity and reducing financial risks for your loved ones.
As many as 85% of successful business owners have outdated estate plans. With changing tax laws and the looming possibility of market shifts, an incomplete plan can create hurdles when it’s time to pass the business baton to new leadership.
Here are five key things every business owner should consider when creating an estate plan.
1. Business Succession Planning
One of the biggest risks a business faces is uncertainty in leadership. If you were to pass away or become incapacitated unexpectedly, would your business be able to continue running smoothly? Without a clear succession plan, the company may face disruptions, disputes, or even failure.
A well-thought-out plan outlines exactly who will take over, whether it’s a family member, business partner, or key employee. A buy-sell agreement can also create a smooth transfer of ownership by setting terms in advance. Remember that the best succession plans don’t happen overnight. By training your successor well in advance, you prepare them for the many responsibilities that come with future leadership.
Keep in mind that the timeline for estate planning varies based on the type of business you own.
Whether your business is a sole proprietorship, partnership, or corporation, estate planning is never a one-and-done process. It’s important to schedule regular reviews of your estate plan to account for tax code updates and changes to your business. Ongoing maintenance is crucial for keeping your plan relevant and effective.
2. Asset Protection Strategies
As a business owner, your financial well-being is tied to both personal and company assets. But what happens if your business faces a lawsuit or creditors come knocking? Without proper asset protection strategies, both your personal and business wealth could be at risk.
One of the simplest ways to safeguard your assets is by structuring your business as an LLC or corporation, which creates a legal separation between business and personal finances. In addition, trusts—such as irrevocable trusts—can offer another layer of protection from lawsuits and creditors. Finally, setting up the right insurance coverage, including liability and umbrella policies, can help shield your assets from unexpected financial threats.
3. Minimizing Estate and Gift Taxes
Business owners often underestimate the impact estate taxes can have on their legacy. If not properly planned, these taxes can significantly reduce the value of the business passed down to heirs, potentially forcing them to sell assets just to cover the costs.
As tax code changes arise and exemption limits for estate taxes fluctuate, it’s imperative to stay abreast of estate planning impacts. For example, estates from those who pass away in 2025 will have a standard exclusion amount of $13.9 million. This exclusion amount represents an increase of $380,000 when compared to estates for someone who died in 2024.
One effective strategy is lifetime gifting, which allows you to transfer portions of the business gradually, reducing the taxable value of your estate. Valuation discounts, such as those for minority ownership or lack of marketability, can also help lower the tax burden. Additionally, sophisticated tools like grantor-retained annuity trusts (GRATs) or family limited partnerships (FLPs) can be used to transfer wealth while minimizing tax exposure.
4. Proper Legal Documentation
One critical component of a successful estate plan includes setting up all legal documents to clearly define your wishes and preserve your business’s future. A comprehensive estate plan should have a will that outlines the distribution of your business assets, powers of attorney for financial and healthcare decisions, and living trusts to help bypass probate.
A power of attorney can designate someone to make decisions on your behalf and carry out your wishes in the event you become incapacitated. Living trusts help facilitate business transfer and avoid probate. For these measures to be fully effective, they must be seamlessly woven into your business operations and well documented.
Proper documentation not only means your wishes are carried out but also helps prevent disputes among family members or business partners. Taking the time to work with an experienced attorney can help you avoid costly legal battles and make sure your estate plan is rock solid.
5. Family Harmony and Communication
Many business owners assume their heirs will seamlessly take over once they’re gone, but the reality can be far more complicated. Without clear communication, disagreements over succession and asset distribution can lead to family disputes or even legal battles.
To avoid conflict, it’s essential to hold open conversations with family members about your intentions. Family meetings can provide clarity on who will take on leadership roles and how assets will be divided. If not all heirs are involved in the business, consider equalizing inheritances through life insurance or other financial assets. Being proactive can help your business remain a source of stability rather than a point of contention for your loved ones.
Family communication can be structured even further to make estate planning more methodical and practical. For example, you might choose to draw up a council of select family members who meet regularly to discuss goals and business plans. This can help to establish consensus and stave off conflict.
Documentation in the form of succession plans, buy-sell agreements, and statements of purpose can all simplify estate planning. Combined with other estate planning elements, a solid communication strategy can generate harmony and reduce confusion.
Proper Estate Planning Can Preserve Your Business’s Future
Taking the time to create an estate plan for your business not only supports your legacy but also facilitates continuity in your business while reducing stress for your family and employees. By addressing succession planning, asset protection, tax minimization, legal documentation, and family communication, you can design a plan that reflects both your personal and professional goals.
If you’re ready to start the conversation and build a strategy that safeguards your business and your loved ones, connect with Lumos Wealth Advisors today. To schedule a meeting, call (804) 330-7800 or email [email protected].
About Michael
Michael Rawls is a Senior Advisor, Financial Advisor, and Investment Fiduciary at Lumos, a financial advisory firm serving individuals, retirees, and business owners throughout Richmond, Virginia. Since becoming an advisor in 2013, Michael has been dedicated to helping clients navigate life’s financial phases with trust, transparency, and personalized strategies. His approach centers on serving as a trusted advocate for his clients, going beyond investment advice to offer comprehensive guidance on lifestyle planning, wealth management, and estate planning. He takes pride in building long-standing relationships and helping clients make the most of financial opportunities, acting as their personal CFO to help align their financial goals with their everyday lives.
A Virginia native, Michael earned his degree from James Madison University and is deeply connected to the community he serves. Outside of work, he enjoys spending time with his wife, son and daughter, golfing, traveling, and exploring local hiking trails. He believes that a well-rounded perspective benefits both his professional and personal life. To learn more about Michael, connect with him on LinkedIn.
