How to Include Business Succession in Your Estate Plan
Sept. 17, 2025
Whether it's a small family-owned shop or a mid-sized operation with dozens of employees, your business represents more than just income. It’s a legacy, a livelihood for your family and employees, and often a cornerstone of your identity. Yet too many business owners delay or overlook a crucial element of estate planning: business succession.
Without a clearly defined succession plan integrated into your estate planning documents, the business you’ve built could face uncertainty, leadership gaps, forced liquidation, or even dissolution. Maryland’s unique estate and inheritance tax laws add another layer of complication, making careful planning not just wise, but essential.
That’s where the Law Offices of Julie A Schejbal, CHTD comes in. Located in Dunkirk, Maryland, we help business owners throughout Calvert County, Prince George’s County, Charles County, and St. Mary's County form comprehensive plans for the future.
We’re here to explain how to include business succession in your estate plan so that your business continues to thrive and your legacy endures for future generations. Contact us today for further assistance with the estate planning process.
Why Business Succession Belongs in Your Estate Plan
Your estate plan should do more than distribute personal assets. It must also secure the continuity of your business in the event of your incapacity, retirement, or death. Integrating business succession into your estate plan minimizes disruption and enables your company to carry on without your daily involvement.
When these two planning elements aren’t coordinated, there’s a risk of confusion, duplicated authority, or missed tax planning opportunities. Family members may be left without clear guidance, employees may lose confidence, and disputes can arise among heirs. Estate taxes and federal estate obligations could also force the sale of business assets to cover liabilities.
An integrated plan provides continuity, protects value, and supports a smooth transfer of leadership or ownership. It also creates fairness among your heirs. If one child or relative is involved in the business and others aren't, your plan should reflect that by making sure:
The active family member receives a controlling stake or management rights.
Other heirs receive equivalent value through other estate assets or life insurance.
Trusts are used to balance control, income, and equitable outcomes.
Without these considerations, families can find themselves locked in bitter disagreements or forced to divide the business in impractical ways. Taking the time now to structure your plan thoughtfully can preserve relationships and protect the company from internal conflict later on.
Valuation and Business Documents
The first step toward integrating business succession into your estate plan is understanding the true value of your business. A credible business valuation forms the cornerstone of planning. It determines how ownership interests are transferred, how taxes are calculated, and how equitable distributions are determined among beneficiaries.
Valuations can be performed using:
Asset-based methods: Focused on net asset value.
Income-based methods: Such as discounted cash flow or capitalization of earnings.
Market-based methods: Comparing similar business sales.
Next, review your business’s governing documents. Your business structure will determine which documents you need to examine:
LLCs should have an updated operating agreement with succession language.
Partnerships must rely on partnership agreements that define transferability of ownership.
Corporations should have shareholder agreements addressing buyouts, voting rights, and transitions.
If these documents are missing or outdated, update them as part of your broader estate planning process.
Choosing the Right Successor
Selecting a successor is one of the most sensitive and strategic decisions a business owner will face. Your successor could be a family member, a trusted employee, or even an outside buyer. Regardless of who you choose, the key is clarity and preparation.
When considering potential successors, evaluate:
Experience and capability: Do they understand the business?
Willingness to take over: Are they enthusiastic and committed?
Family dynamics: Will other family members support this choice?
Once a successor is chosen, begin training them early. Provide mentorship, increase their responsibilities, and expose them to all areas of the business to prepare for the eventual transition. If you're not sure who will take over, create a contingency plan while keeping your options open.
Creating a Buy-Sell Agreement
A buy-sell agreement is essential for any business with multiple owners—or even for sole owners who want to define what happens to their shares. This agreement outlines how business interests will be bought, sold, or transferred when a triggering event occurs, such as death, retirement, disability, or voluntary departure.
There are three common types of buy-sell agreements:
Cross-purchase: Remaining owners buy the departing owner's interest.
Entity-purchase: The business itself buys back the shares.
Wait-and-see: A hybrid approach offering flexibility at the time of transfer.
Each agreement should also include a clear valuation method to prevent disputes. This could be a set dollar amount, a formal appraisal, or a valuation formula based on earnings or revenue. A well-drafted buy-sell agreement makes sure that ownership transfers are efficient, equitable, and legally sound.
Providing Adequate Funding
A succession plan will only be effective if there are resources available to carry it out. Business buyouts, tax obligations, and operating expenses all require funding. Without it, your plan may fall apart—even if the legal structure is in place.
To prioritize proper funding, consider:
Life insurance: Use policies to fund buyouts and cover estate taxes.
Irrevocable Life Insurance Trusts (ILITs): Keep policy proceeds out of your estate for tax efficiency.
Cash reserves or business savings: Provide liquidity to sustain operations during the transition.
Trusts: Use revocable or irrevocable trusts to transfer ownership smoothly and protect business interests.
Some owners also use gifting strategies to gradually transfer business interests to heirs or successors during their lifetime. This approach can reduce your taxable estate and give the successor time to develop experience while you're still around to guide them.
Planning for the Unexpected
While most owners think about succession in terms of retirement or death, incapacity is often overlooked. Yet the risk of illness, injury, or cognitive decline is real—and can derail a business without warning.
To prepare, make sure you have:
Durable power of attorney: Empower a trusted individual to handle business decisions if you're incapacitated.
Emergency management plan: Appoint a temporary manager or operating officer.
Liquidity reserves: Maintain working capital to manage short-term disruption.
These contingency measures make sure that your business continues to operate—and retain its value—even if you're unexpectedly unable to lead.
Aligning Succession With Personal Estate Goals
Your business is a major part of your personal estate, and the two must be planned in tandem. If one heir is inheriting the business, how will others be treated fairly? If the business is sold, how will the proceeds be distributed?
Use these strategies to align your personal and business goals:
Create equalization strategies: Life insurance or property bequests can help balance inheritances.
Name the right trustees or executors: Confirm that they have the experience or advisors to manage business assets.
Coordinate your trust and will documents: Avoid contradictory instructions and minimize delays.
Also consider charitable goals, retirement income needs, or long-term care planning as part of the overall strategy. Trusts and charitable structures can help balance these priorities without compromising the business’s stability.
Don't forget to update beneficiary designations for retirement accounts, insurance, and annuities. These assets bypass your will and need to be kept in sync with your estate plan.
Communication and Regular Reviews
Once your plan is in place, it’s vital to communicate it clearly. Talk to family members, business partners, and employees to confirm that everyone understands their roles and expectations. Transparent communication reduces confusion, builds trust, and helps avoid future conflict.
Equally important is keeping your plan current. Review your business succession and estate documents every few years, or when major life events occur, such as:
Marriage or divorce
Birth or death in the family
Business expansion or sale
Tax law changes
Regular updates help make sure that your plan reflects your current wishes, values, and financial situation.
Avoiding Common Pitfalls
Despite the best intentions, many business owners fall into the same avoidable traps. The most common mistakes include:
Failing to update succession documents regularly
Lacking a clear valuation method or buy-sell structure
Ignoring the financial needs of heirs not involved in the business
Overlooking liquidity for taxes or emergency expenses
Assuming successors are prepared without proper training
By addressing these issues proactively and working with experienced advisors, you can avoid these pitfalls and leave your business—and your family—in a much stronger position.
Contact an Experienced Estate Planning Attorney
Including business succession in your estate plan isn’t just about protecting your business—it’s about honoring your life’s work and making sure it continues to benefit those you care about most. Whether your goal is to keep the business in the family, transition to a loyal employee, or sell to a third party, the key is careful, integrated planning.
At the Law Offices of Julie A Schejbal, CHTD, our business planning attorney works with business owners to craft tailored estate and succession strategies that safeguard both their personal and professional legacies. Based in Dunkirk, Maryland, we serve clients throughout Calvert County, Prince George’s County, Charles County, and St. Mary's County.
If you haven’t yet addressed business succession in your estate plan—or if your current plan is outdated—now is the time to act. Let us help you protect what you’ve built. Contact Attorney Schejbal today to schedule a consultation.