The following is an excerpt from Ice Miller's Business Transition Strategies to Preserve Wealth Guide, which provides insights on a variety of topics to help ensure a smooth business transition. 

Second, confer with qualified professional advisers about the tools available to pass the family business to the involved child while providing a legacy that you deem appropriate to your other children. These options may include:

  • Other assets. While not always the case, there may be meaningful non-business assets, such as real estate, investments, etc., that could pass to other children to provide a meaningful inheritance.
  • Life insurance. Policy proceeds can provide cash as an offset to the value of business interests that transfer to one child. Life insurance also can provide a source of liquidity if transfer taxes at death are a concern.
  • Non-voting interests. Making children who are not involved in the business "silent partners" might be the right option. Ownership can be reconstituted into voting and non-voting interests, and the voting control could pass to the child who will succeed to the leadership position. Non-voting shares allow the other children to benefit from cash distributions from the company (if available) and likewise to share in the proceeds if the company were sold in the future.
  • Private financing. The senior generation might elect to sell the business to the involved child, providing favorable private financing over a period of time. Advisers could assist with setting terms that allow projected company cash flows to assist with funding the buyout. This plan could begin during lifetime or be included in the senior owner's estate plan. Either way, the proceeds from the sale could provide a deferred but valuable benefit to the entire family.
  • Trusts or other structures. Passing a portion or all of the business to a long-term trust or certain charitable structures could ensure its continuation. The child involved in the business could continue to lead the company with appropriate compensation and incentives, but the ownership would be held separately. This structure could provide multiple benefits, including a long-term legacy for future family generations, reduced future death taxes and furtherance of family values. As you would expect, careful selection of fiduciaries and other advisers is the key to successfully implementing these options.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.