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What happens after the death of a business owner?

Family business succession planning strategies

Death and taxes are inevitable, so it should not be a surprise. The passing of a business owner is a defining moment for both a family and the associated business. Preparing for the inevitable—the death of a business owner—can better position the families and organization.

Why preparedness is so important?

In the United States, planning related to the death of a business owner often focuses on navigating the complicated issues associated with the transfer of ownership. In addition to vitally important tax planning, the family, business, and stakeholders should look beyond solving for the immediate burdens and address additional contemplated consequences of the business owners death.

Issues to consider include the other financial implications of a business owners death, potential challenges, and considerations associated with the maintenance and transition of the business, the need for a clear articulation of the strategy and future leadership, and potential monetization and resulting impact on the family. In the absence of addressing these other considerations, effective tax planning results may upend other equally important outcomes–and that is when surprises happen.

Read more about family business succession planning strategies.

Explore the Death of a Business Owner interactive

The passing of a business owner is a defining moment for a family and the business and proper planning can position and prepare both for the inevitable.

Learn more from our death of a business owner interactive to better understand family business succession planning strategies.

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How businesses and families with advisers can prepare for the inevitable

Preparedness exercises seek to put the business, the stakeholders, and most importantly, the family, in a significantly better position to address the implications of the death of a business owner. The exercises identify gaps in knowledge, documentation, leadership and other areas that are best addressed while the business owner is alive, as well as mapping out the key steps to be addressed following the death of the business owner.

Since no two businesses are alike, the exercises are tailored to the business and families specific circumstances. They should touch upon relevant items relating to the business owner, including:

  • A 90-day drill to identify necessary financial, accounting, legal, regulatory, and administrative action items to address immediately following the business owner’s death.
  • Business considerations including identification of talent, leadership, vision, all while supporting and defining the strategy.
  • Financial implications of the death, including potential expenses, liabilities, and taxes, as well as identifying sources of liquidity to pay for them at both the family and business.
  • A sale of the business or change in ownership.
  • Developing a transition plan for the family and business, often accompanied by a Business Transition and Transformation Lab, which help address changes that inevitably come about in the wake of a business owner’s death.

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Wendy Diamond

Wendy Diamond

Partner | Deloitte Tax LLP

Wendy leads the Private Wealth Tax sector of the Investment Management industry practice. In this role, she works with colleagues across the country to develop and deliver innovative tax solutions rel... More

Wolfe Tone

Wolfe Tone

US Deloitte Private Tax Leader

Wolfe is the US Deloitte Private Tax leader and a tax partner in the Chicago office. With over two decades of experience, Wolfe has served a variety of technology, life science, retail, real estate, m... More