Estate Planning for Baby Boomer Business Owners: Nearly 40% of all privately owned businesses in the US are owned by Baby Boomers, with predictions that 70% of these BBBOs will transition out of their businesses in the next decade. In the article “Estate planning considerations for business owners,” Reuters says these business owners will need estate planning strategies to achieve their own objectives, while maintaining control during their lifetime.
Most BBBOs hold most of their wealth in their business interests, creating risks and liquidity challenges. Almost 90% of the 14 million businesses in the US are family-owned and managed. The Small Business Administration reports that 80% of family businesses don’t pass successfully to the second generation, and of the 20% that do, 80% never make it to the third generation.
Estate Planning for Baby Boomer Business Owners: These statistics underscore the critical need for comprehensive estate planning. Every BBBO—and every Boomer—needs to have an estate plan, created with the help of an experienced estate planning attorney, regardless of their plans.
Business owners are concerned about creditor protection or mitigating the impact of estate taxes. There are several common trust structures to consider.
A beneficiary-defective irrevocable trust (BDIT) is a complex trust with strong protections. Assets grow income tax-free inside the trust while the business owner pays income taxes on personal assets. Appreciation shifts outside the business owner’s taxable estate. The business owner maintains control as a trustee, gaining creditor protection for trust assets. This is a somewhat new type of trust, so speak with your estate planning attorney to learn if it’s right for you.
A Spousal Lifetime Access Trust (SLAT) is used to protect the surviving spouse. It locks in the lifetime gift tax exemption and allows the surviving spouse to receive distributions for health, education, maintenance and support. Grantor trust status allows for tax-free growth. However, the gift is irrevocable; the benefits are lost in the event of a divorce; and the couple must be mindful of avoiding the reciprocal trust doctrine if both spouses have a SLAT created to benefit each other.
Other trusts to consider include Irrevocable Life Insurance Trusts (ILITs), Grantor Retained Annuity Trusts (GRATs), and Intentionally Defective Grantor Trusts (IDGTs), among others.
Trustee selection must be made carefully and updated over time to ensure that the right person is in charge of the trusts. Corporate fiduciaries may be unwilling to act as trustees when the trust assets consist of ownership interests in a family business, due to management responsibilities and fiduciary exposure. A child who manages the family business may face conflicts between their fiduciary obligations to trust beneficiaries and to the business and its owners.
To address these types of conflicts, estate planning documents may acknowledge and waive conflicts of interest, authorizing individual trustees to act despite the self-dealing prohibition, if they don’t exercise powers that raise general power of appointment issues. Many business owners incorporate a business trustee to manage business assets and a general trustee to administer non-business assets.
Estate Planning for Baby Boomer Business Owners: Baby boomer business owners and business owners of all generations benefit from the help of sophisticated estate planning attorneys with experience in the challenges presented by family business situations. By implementing appropriate strategies and estate planning techniques before the retirement or death of the business owner, substantial tax savings and asset protection can occur. With good planning, a business owner’s life’s work can be protected for future generations.
Reference: Reuters (Oct. 24, 2025) “Estate planning considerations for business owners”