Family Business Legacy: Six Smart Wealth Transfer Techniques

Over the next twenty-thirty years, 78 million baby boomers will transfer $84 trillion of  wealth to their families and the charities they care about. This includes millions of baby boomers who are business owners planning to transfer their businesses to heirs.  

As a business owner, you want to use smart wealth management tactics that protect  what you’ve worked hard to build over the years. Not only do you want a smooth  ownership transition, you should also focus on ways to limit the taxes that come with  transferring wealth to the people you care about.  

It’s about laying the groundwork for wealth transfer that honors your family’s values,  sustains the business’s future, and supports the next generation of members taking the  reins.  

At Brown|Miller, we combine thorough financial planning with our expertise in investment management in Washington, DC, to bring you a complete suite of wealth  transfer and management services. 

In this guide, we’ll explore six time-tested techniques for transferring wealth within a  family business, offering practical advice for business owners serious about  safeguarding their legacy and empowering their successors. 


Read Our Latest Quick Guide: Discover, Design, Deliver: Estate Planning for Wealth Transfer

Gifting Strategies  

As a business owner, you can strategically transfer shares of your business to family  members by utilizing annual gift tax exclusions and lifetime gift tax exemptions to  reduce your tax liabilities.  

You can gift $18,000 in 2024 to as many people as you’d like this year without incurring  a gift tax. Beyond this, before any gift tax payment is due, gifts can be applied against  the lifetime exemption amount of $13.61 million. 

For example, let’s say you have two children. You could gift each child $18,000 worth of  shares annually without tax implications. Over time, you can transfer significant wealth  without hitting the lifetime gift tax exemption amount.  

Family Limited Partnerships  

Family Limited Partnerships (FLPs) offer a strategic avenue for business owners to  manage wealth transfer within their family. Using an FLP, you can distribute business  shares to family members, lowering the taxable estate while maintaining decision making power. This setup often qualifies for valuation discounts on gift and estate taxes  because the transferred interests lack marketability and control.  

For example, allocate some of your business shares to your children through an FLP.  You retain control over business decisions and operations despite the children owning  shares. This not only aids in gradual wealth transition but also capitalizes on tax  efficiencies, making it a smart choice for succession planning. 


Grantor Retained Annuity Trusts (GRATs) 

Grantor Retained Annuity Trusts (GRATs) allow you to transfer high-appreciation  potential assets to heirs with minimal tax implications. In a GRAT, as the grantor, you  place an asset into a trust for a predetermined period. During this term, you receive a  fixed annual annuity payment. 

If the asset’s growth outpaces the interest rate set by the IRS, the excess value  transfers to your beneficiaries without incurring additional taxes. 

For instance, say you place $1 million in stocks into a GRAT for ten years, expecting the  stocks to appreciate significantly; you receive yearly payments based on the original $1  million plus the IRS interest rate. If the stocks perform exceptionally, surpassing the  expected rate, the gain is passed to your heirs more tax-efficiently, potentially saving  substantial estate taxes. 


Buy-Sell Agreements 

Buy-sell agreements are another way to determine how your business will be  transferred when you pass away, become disabled, or retire. These agreements offer a  clear, predetermined path for ownership transition, helping to maintain business stability  and prevent potential conflicts among beneficiaries and other family members.  

For instance, let’s say you co-own your business with a partner. A Buy-Sell Agreement  might stipulate that if one partner were to pass away, their share would be automatically  offered to the surviving partner at a previously agreed-upon price. This arrangement  ensures the business can continue operating smoothly while respecting the interests of  all parties involved. 


Life Insurance  

Life insurance policies are another strategic tool for managing financial obligations that  arise during wealth transition, particularly in handling estate taxes and facilitating buy sell agreements. Certain life insurance policies can ensure your beneficiaries can  access liquid funds to cover taxes without the pressure to quickly sell less liquid  business assets, often at less-than-optimal prices.  

For example, let’s say you have a life insurance policy on yourself as a business owner.  You can structure a policy to pay out upon your passing, providing the necessary funds  to cover estate taxes or to buy out the deceased owner’s share of the business. This  setup preserves the continuity of the business and supports a smoother transition of  wealth to the next generation or remaining business partners. 



Trusts are powerful tools in estate planning, each tailored for specific purposes.  Irrevocable Life Insurance Trusts (ILITs) are designed to exclude life insurance  proceeds from the insured’s estate, thus reducing potential estate taxes. By owning a  policy within an ILIT, the proceeds are paid directly to the trust upon the insured’s death,  avoiding estate tax and providing financial support to beneficiaries according to the  trust’s terms. 

On the other hand, Dynasty Trusts are set up to pass wealth across multiple  generations, minimizing estate taxes at each generational transfer. These trusts can  preserve family wealth for many decades, often perpetually, under the guidance of set  rules and conditions that manage wealth distribution. 

For example, your family might establish a Dynasty Trust to support educational  expenses, entrepreneurial ventures, or charitable activities for several generations,  thereby ensuring that their family’s wealth serves a specific purpose beyond just  financial support, fostering a legacy of education, entrepreneurship, or philanthropy  within the family. 


About Brown|Miller  

Our team of experienced Washington, DC, area investment management professionals provides wealth management services to successful individuals and families. 

Our unique 3-step holistic wealth management method, Discover-Design-Deliver, helps  us get a clear and complete picture of your financial circumstances, no matter where  you are on your life’s journey.  

Through this careful and thoughtful process, we craft a financial plan that grows and  changes with you as you move through life’s ups and downs. Smart financial planning  can improve your well-being.  

Our financial planning and wealth management services are intended to support you,  your family, and a wider community. By doing so, we can support the education of  young ones and develop future leaders, making sure their decisions are as consistent  as ours. Then, we boost charitable giving and provide a safety net for loved ones  against life’s unexpected twists and turns. 

Ready to learn more about our wealth transfer services? Let’s connect.



Disclaimer: This article is intended for informational purposes only, and not to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report

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Author: Christopher W. Brown, CFP®, CIMA®

Christopher W. Brown is the Founder and Managing Principal at Brown | Miller Wealth Management.