A trust is a valuable tool for your business succession plan. Here’s why.

A trust is a valuable tool for your business succession plan. Here’s why.

What do you imagine when you think about trusts? That they’re only for wealthy families? Or that they’re great for helping the elderly or those with disabilities? Trusts are useful in those circumstances, but they can also be beneficial to almost anyone in planning for their future.

That includes family or closely held business owners who worry about what will happen to their companies when they’re gone.

A succession plan is much more than just an idea of who will run the company when you are not able or no longer want to. Multiple factors come into play: Will you sell? To whom? Will your family take over? How will the business keep operating? What if something happens suddenly? How will you manage your personal finances once you’ve retired? What happens to your family, your employees and the company after you pass away?

Don’t wait to answer these questions. Start your succession plan now. And look at trusts as one option in your planning toolbox.

  1. Trusts can provide privacy.
    A trust may avoid probate, which allows your company to pass to your beneficiaries without having to file with the court in your state. By avoiding this process, your assets may not be subject to public records.

  2. Trusts help avoid conflict among family members.
    When you name a trustee, it is that person’s duty to follow the trust document language (your wishes). The trustee is beholden only to that, not to anyone else’s individual opinions. They are required to invest the assets in the best interest of all of the beneficiaries. When a closely held business is one of those assets, the trustee needs to run the business in the best interest of all beneficiaries, regardless of whether they work at the company.

  3. Trusts help plan for the unexpected.
    I have worked with families in the unfortunate circumstance of having the head of their company pass away at a young age without a plan. We were able to keep them going during the crisis, but the business did not survive for long beyond that because there was no plan in place. A trust can set up a process for bequeathing the business and ensuring seamless leadership. It can also plan for how to carry it forward without the family – if they’re not interested in taking over, the business can be sold. No matter what, it puts that plan in place early and prepares everyone for the roles they will play if you should die unexpectedly.

  4. Trusts can be useful during your lifetime.
    If you simply want to retire and exit the business, a trust can plan for the full continuum, beginning with a sale or gift to family, through your retirement income and what happens with your assets after your eventual death.

  5. Trusts can tie together your personal assets and your business succession plans.
    Trusts allow for complex arrangements of multiple assets and multiple vehicles for dealing with them. At the same time that the trust is managing what happens to your business, it can also manage the proceeds of your liquidity event to set up your retirement. A trust advisor will run projections for expected cash flow to help you analyze your options. They will take into account Social Security and retirement benefits, sales proceeds and all of your other assets. The goal will be to provide the best possible return for a reasonable amount of risk.

Trusts can give you several advantages in succession planning for your business. There can even be tax advantages in many states related to selling, gifting and distributing the proceeds. A good trust advisor will work as a member of your team, alongside your accountant and your attorney, to give you the best possible outcome.


Deanne Ebel is a trust advisor for Pinnacle Financial Partners. She is based at the firm’s North Main Street office in High Point, NC, and can be reached by email at Deanne.Ebel@pnfp.com or by phone at (336) 881-3603.

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