7.1 Introduction

• Library: Estate Planning in Virginia (Virginia CLE) (2018 Ed.)

7.1 INTRODUCTION

7.101 Importance of Estate Planning. Since the closely held business is often the primary asset of a client's estate, careful estate planning is critical and often presents special opportunities and challenges. While planning to minimize estate taxes, the business owner also faces the challenge of selecting a suitable successor to operate the business. Such planning is complicated by the inherent difficulties associated with the valuation of the owner's closely held interest. The probability that the owner's closely held interest is not readily marketable also forces the owner and his or her estate planner to focus on the importance of, and the need for, providing liquidity in the estate when creating the estate plan.

Among the estate planning problems and considerations facing business owners is how to replace the business income that has supported their families. Often, the business that the owner has worked hard to build must be divided among children who have assumed some operational control or participation in the business during the owner's lifetime. In many cases, the business owner must plan for the transfer of control and ownership of the business to children while at the same time arranging for the support of his or her surviving spouse. In some situations this balance may be difficult to achieve, especially when the business owner has played a key role in the success of the business and cannot be easily replaced by his or her children or by key employees.

Proper estate planning addresses these considerations and many others, and allows the business to be transferred and maintained according to the business owner's wishes. A smooth transition may be facilitated by the careful structuring of the business in an appropriate type of business entity and by the use of a shareholder agreement. Shareholder agreements are also referred to as "buy-sell agreements" in the partnership and limited liability...