Call us for Consultation
(562) 526-6941

Estate Planning for Business Owners in Los Angeles, California

Estate planning is important because it informs your loved ones of your wishes if you're incapacitated or die. Plans can be straightforward or complicated, depending on the types of assets and investments that must be managed. Business owners fall into the latter category. However, a Los Angeles estate planning attorney simplifies the process so you can rest assured that your business and personal assets are properly distributed.

Why Do Business Owners Need an Estate Plan?

You need a business estate plan for three primary reasons.

  1. The smooth continuation of your business should you be incapacitated.
  2. The smooth transition of the business to new ownership, either through succession planning or sale.
  3. To protect business assets and the distribution of assets to your beneficiaries, while avoiding probate and estate taxes.

Without a business estate plan, there may be confusion about who owns and/or runs the business, which can lead to legal difficulties and disputes between family members and business partners. Instead of continuous business operation, your business could be run into the ground.

5 Reasons Business Owners Need Estate Plans

Five of the most important reasons for business estate planning include:

1. Tax

If you're a small to medium size business valued at less than $11.18 million, you won't have to pay federal estate tax. However, taxes can creep up on you in other ways. Without clever estate planning, retirement accounts and other investments can be taxed.

2. Family Planning

Succession planning in family-owned businesses can be tricky no matter what. All your children might want to run the business, none of your children might want to run the business, or some of your children want to run the business and the others don't.

Firstly, it's important to talk the matter over with your children to see where everyone stands. When you know who wants to join the business, you can discuss business succession planning with your estate planning attorney in Los Angeles, CA.

It's a good idea to take a broad view of the issue. For example, if you leave your business shares to your son, there's a chance that his wife will also own the shares (marital property law). If they get divorced, succession gets turned on its head. Your lawyer will help you plan for this type of circumstance.

3. Probate

Probate can wreak havoc on estate planning. It can be expensive, which eats into the estate's value. It can also take upwards of 18 months to bring the proceedings to a close. Your business could be in limbo while probate shuffles through court.

Trusts are an excellent way to avoid probate completely and ensure your business continues with nary a hiccup.

4. Business Interests

One way to protect your business interests is to create a family limited partnership (FLP). An FLP is a handy vehicle to transfer wealth across generations while avoiding estate and gift taxation. Another advantage for business owners is that they retain control over business operations.

5. Asset Protection

It's important to ensure your business (and personal) assets are protected from creditors and even from business partners or family. The best way to do this is to create a trust. Irrevocable trusts are separate entities and "own" the assets within. This means you don't own the assets, so they can't be touched by creditors.

Irrevocable trusts also set out terms and directions for use, which can't be changed. This ensures that only designated beneficiaries can access the trust after terms have been met.

Factors to Consider for Estate Planning for Business Owners

There are several factors to consider before you officially get started with your Los Angeles estate planning lawyer.

What Are Your Assets?

It's important that you include all of your assets and not just business assets; for example, real estate, personal property, investments, retirement accounts, etc. The more comprehensive the better.

Who Are Your Beneficiaries?

As with assets, you need to include every beneficiary you can think of, including business partners and your son's wife.

You must also consider the tax implications for your beneficiaries, but you can go through this with your lawyer or a tax consultant.

What Estate Planning Tools Are You Going to Use?

This is particularly important because these are the tools that are going to keep your estate out of probate, minimize tax, and properly distribute and protect your assets. Tools include:


A trustor, who creates the trust, transfers assets into the trust, which is managed by a trustee. There are many kinds of trusts, including charitable trusts, revocable living trusts and irrevocable education trusts, but they all have two very important advantages: no probate and estate tax.

Buy-Sell Agreements

Buy-sell agreements are handy for business owners because they create a legal agreement that states the terms of a buyout should one of them become incapacitated or die.


A few insurance policies come into play. Life insurance provides a virtually immediate cash payout that can be invaluable in maintaining business operations until other aspects of estate administration have been settled. There are also disability insurance and key person insurance.

Powers of Attorney

You appoint a power of attorney (PoA) to manage essential aspects of your life if you are incapacitated. Some people appoint one PoA, but it's recommended that you have two powers of attorney, one for medical decisions (who implements the terms of a living will or advanced health care directive), and a durable power of attorney for financial decisions and management.

Experienced estate planning attorneys in Los Angeles will give you advice about the character a PoA needs to carry out its responsibilities.

The Best Way to Get Started

The best way to get started is to engage a Los Angeles estate planning attorney who specializes in estate law and estate planning. McKenzie Legal & Financial has a department dedicated to estate planning for individuals and business owners.

We don't have a cut-and-paste approach to creating estate plans. Every business is unique and every business owner has unique needs. All of our estate planning documents are drawn up to suit your situation.

Call us at 562-594-4200 to book a consultation or complete the contact form on our website and we'll answer all your estate planning-related questions.

Thomas McKenzie Law
Estate Planning Attorney in California. Full-service law firm specializing in estate plans, wills and trusts, long-term care, and financial consulting. Thomas L. McKenzie received his Juris Doctor degree from Western State University College of Law, in Fullerton, California. While working full-time at night and attending full-time daily classes, Tom graduated law school with honors in 1993.

A Proud Member of

Lawyer Of Distinction
Elder Counsel
Get your assets in order and protect your loved ones! Schedule a consultation
Please enable JavaScript in your browser to complete this form.
Free Legal Tips
© 2024 McKenzie Legal & Financial. All Rights Reserved.