Succession Planning for a Family Business: The Tax Decisions, in Order

A note on scope before anything else. Haigler CPA Group does not provide trusts and estates services and does not give legal advice. Succession planning needs an attorney, and usually a valuation specialist. What follows is the tax terrain, so that the conversation with that team starts from the right place rather than from a blank page. All figures are 2026 figures.

The question underneath the question

Owners usually open this conversation with a mechanism — a trust, a gift, a buy-sell. The prior question is which of three things is actually happening:

• The business is going to a family member who works in it.
• The business is going to be sold, and the proceeds are what passes to the family.
• It is going to a family member who does not work in it, alongside siblings who do — which is the hardest of the three and the one that most often goes wrong.

The tax answers differ sharply across those, and choosing a mechanism before answering this is how families end up with a structure that solves a problem they did not have.

The 2026 numbers

• Estate basic exclusion amount: $15,000,000 per person for 2026, indexed going forward. For a married couple with portability elected, effectively twice that.
• Annual gift tax exclusion: $19,000 per recipient for 2026, unchanged from 2025. Gifts within the annual exclusion do not consume lifetime exclusion and do not require a return.
• Gifts to a non-citizen spouse: $194,000 for calendar year 2026.

For most Lowcountry family businesses the estate exclusion means federal estate tax is not the live issue. That changes what planning is for: it becomes about basis, about control, and about the business surviving the transition — not about avoiding a 40% rate that will never apply. Advisers who lead with estate tax avoidance for a family well under the exclusion are selling a solution to someone else's problem.

Basis is usually the real prize

Property acquired from a decedent generally takes a basis equal to its fair market value at death. Property given during life generally carries over the donor's basis. For a business built from nothing, the difference between those two is close to the entire value of the company.

So the instinct to give shares away early — sensible when the estate exclusion is the constraint — can be expensive when it is not. A child who inherits stock with a stepped-up basis and sells has little or no gain. A child who was gifted the same stock and sells has the parent's basis and pays tax on the whole appreciation. Which is better depends on whether the estate is anywhere near the exclusion, and for most families it is not.

Buy-sell agreements after Connelly

In June 2024 the Supreme Court decided Connelly v. United States, and it changed a structure that had been standard for decades.

Two brothers owned a company. The agreement said that on a death, the survivor could buy the shares, and if he declined, the company would redeem them. The company held life insurance on each brother to fund that. When one died, the company received the insurance proceeds and used them to redeem his shares. The estate argued the redemption obligation offset the insurance, so the proceeds did not increase the company's value.

The Court disagreed, unanimously. A company's contractual obligation to redeem shares is not a liability that reduces the value of those shares. The insurance proceeds counted, the company was worth more than the estate had reported, and the estate tax followed.

The practical consequence: any closely held business with a redemption-style buy-sell funded by company-owned life insurance should have it reviewed. A cross-purchase structure, where the owners hold policies on each other rather than the company holding them, does not produce the same result — but it has its own complications as owner counts rise. This is squarely an attorney's document and a valuation question, and it is the item on this list most likely to be sitting unexamined in a drawer.

If the exit is a sale

Two things are worth knowing early, because both depend on decisions made years before a sale.

Where the deadline actually is

There is rarely a filing date attached to any of this, which is precisely why it slips. The real constraints are these:

• A valuation-based transfer needs a defensible valuation, and a valuation needs clean books for several years first.
• A gifting program that uses the annual exclusion works by repetition. Started at 60 it does real work; started at 78 it does very little.
• A successor has to be trained and seen to be running the business before the transition, or the value transfers and the business does not.
• Buy-sell terms are negotiated best when everyone is healthy and no one knows who will be the buyer.

Three to five years is the honest planning horizon for most transitions. That is not a sales line; it is how long clean books, a credible valuation, a trained successor and a reviewed agreement take to exist at the same time.

Our part of that is the tax analysis and the books that everything else depends on. The legal instruments are not ours, and we will say so rather than draft around it.