Corient Wealth Management: Estate Planning for Business Owners

What happens if an owner's estate is under $15,000,000?

A common belief suggests that an estate below the $15,000,000 basic federal exclusion for 2026 needs only a simple will. Yet while no federal estate tax may be due under that threshold, rules governing basis step-up at death, income in respect of a decedent, and corporate signing authority still decide what your family actually keeps.

Consider Kavya, a hypothetical person, who is 46, the divorced sole owner of a C corporation medical billing company, and mother to one child in high school. Kavya holds a $100,000 basis in her corporate stock and accepts a $4,000,000 purchase offer structured as $2,800,000 cash at closing and a $1,200,000 earn-out paid over 3 years ($400,000 each year). Her gross profit ratio on the transaction is ($4,000,000 − $100,000) ÷ $4,000,000 = 97.5%. Now evaluate two versions of her household that differ only in the timing of her death.

In version A, Kavya dies 1 month before closing. Her company shares receive a basis step-up to their fair market value of about $4,000,000 under IRS rules. When her child's trust subsequently closes the sale, the taxable capital gain is roughly $0. In version B, Kavya signs the closing agreements, receives the initial payout, and dies 1 month after closing. Her final return reports $2,730,000 of capital gain ($2,800,000 × 97.5%). The remaining $1,200,000 earn-out is classified as income in respect of a decedent, meaning it receives zero step-up in basis. That triggers $390,000 of taxable gain on each $400,000 installment ($1,170,000 total gain) paid to the trust over 3 years. Total taxable gain across version B is $3,900,000, compared to $0 in version A. Federal estate tax is $0 in both cases.

Two constraints apply here. Version A assumes no binding sale agreement was legally enforceable before death, because the IRS can treat proceeds from a transaction substantially complete at death as income in respect of a decedent. Furthermore, these figures precede any potential Section 1202 qualified small business stock exclusion, whose qualification remains fact-dependent. The planning takeaway is concrete: your trust paperwork must grant the trustee power to collect earn-out installments and preserve liquidity for the tax cost. Because market and operating variables shift, past results do not predict future ones, and you can lose money by investing sale distributions.

5 parties, 5 jobs in an owner's estate plan

A functioning estate plan depends on distinct responsibilities across five parties. The business owner chooses the trustee, names the guardian for minor children, selects the distribution age for heirs, and signs corporate resolutions. Corient Wealth Management maps out every asset, reviews account titling, models the lifetime tax cost of gifts versus transfers at death, and audits beneficiary paperwork to prevent asset leaks.

The CPA tracks corporate tax basis, prepares annual Form 1040 and Form 1120 returns, files Form 709 gift tax returns, and analyzes Section 1202 qualification. The estate attorney drafts the will, revocable living trust, and durable power of attorney authorizing corporate execution. The custodian holds the assets, retitles investment accounts to the trust, and updates transfer-on-death instructions. Expect administrative delays of 2 to 4 weeks if the custodian rejects incomplete trust certifications.

• Client picks fiduciaries and signs entity paperwork
• Corient Wealth Management maps assets and models tax costs
• CPA handles basis tracking and gift reporting
• Attorney drafts trusts, wills, and signature powers
• Custodian retitles non-corporate accounts and records beneficiaries

When does an owner's estate plan need a fresh review?

Estate plans for business owners need a formal review once each year, along with immediate updates upon signing a letter of intent, closing a deal, reaching an earn-out milestone, remarriage, or moving across state lines. State-level estate tax exemptions can be far lower than the federal basic exclusion of $15,000,000 per person.

Which deadlines govern an owner managing installment proceeds after a corporate sale? The schedule below outlines the key filing and distribution dates you must track alongside your professionals.

The finished plan fits in one binder

A practical estate file compiles everything an executor needs into a single reference volume. It opens with a single sheet that shows who owns each corporate share, brokerage fund, retirement plan, piece of real estate and life insurance policy. Behind that sheet sit the executed will, revocable trust agreement, and power of attorney, paired with written tax-cost projections comparing outcomes before and after a corporate sale. A clean fiduciary contact sheet lists the exact advisors, accountants, and attorneys the successor trustee must notify first.

What happens if the will is updated but the beneficiary forms are not?

Failing to update retirement account designations after a major life change is a mistake careful people make. For example, rewriting a will after a divorce while leaving an ex-spouse on a corporate 401(k) beneficiary form creates an unintended transfer.

Federal ERISA rules require the plan administrator to pay the person named on the official form, overriding any conflicting instructions in your personal will. In that situation, a $350,000 retirement balance goes directly to the ex-spouse rather than the child's trust. At Corient Wealth Management, checking every primary and contingent beneficiary form against current estate paperwork remains standard procedure during each annual review.

6 pieces of paperwork for your first planning review

Your introductory discussion with our team clarifies the structure of any pending buyout offers, trustee succession, guardian appointments, and distribution ages for heirs. We examine the exact split between upfront cash, seller notes, and earn-out targets to project eventual liquidity demands. Corient Wealth Management gives you a written explanation of how it is paid, and you get it before a single account moves or any agreement is finalized.

An honest limitation deserves mention: estate planning paperwork will not settle whether your equity qualifies under Section 1202, nor will it eliminate income tax on post-closing earn-out payments. If your total net worth sits well beneath $15,000,000, this work earns its keep through operational control, liquidity management, and basis rules. Federal estate tax shelters matter far less at that level. If any part of the sale price arrives after closing, settle two points on paper while the purchase agreement is still unsigned: who collects those payments if you die, and which account pays the tax on them.

• Purchase offer or letter of intent showing payment structure
• Corporate stock ledger and historical tax basis records
• Current will and revocable trust instruments
• Beneficiary statements for company 401(k) accounts, IRAs, and life insurance
• Divorce decrees or settlement agreements outlining required provisions
• Most recent Form 1040 individual and Form 1120 corporate tax filings