Estate planning for business owners with EP Wealth Advisors

What does estate planning for business owners cover, and who needs it?

Estate planning for business owners organizes the transfer of private operating stock, seller-financed notes, retirement assets and entity control so that surviving spouses, children and partners avoid ownership disputes and avoidable tax burdens.

Picture an owner who just signed a seven-year seller note to transfer his machine shop, only to realize his will dates from before his second marriage. In daily practice, planning covers the equity shares or the promissory note that replaced them, the buy-sell contract, IRA and SEP-IRA beneficiary designations, life insurance ownership, and durable powers of attorney if illness prevents signing checks.

This coordination matters most for three groups. The first is founders whose company is worth more than everything else they own combined. The second is blended families supporting children from a prior marriage. The third is anyone collecting a multi-year installment note from a buyer. With a 2026 federal basic exclusion of $15,000,000 for each person, federal estate tax rarely reaches a mid-sized operation. The harder question is who controls the note payments and how the surviving spouse covers the mortgage and groceries. Some states levy separate estate or inheritance taxes with far lower exemption levels, so review your state rules carefully.

Because EP Wealth Advisors builds plans around family and what owners leave behind, it calculates each heir's dollar share after subtracting the built-in tax on that specific asset before recommending any transfer. In Ray's case, $400,000 of note payments is worth less to a child than $400,000 of cash.

What you receive during the estate planning process

Clients receive a clear set of written inventories and analytical tools to track their business assets and estate liabilities.

EP Wealth Advisors provides six concrete deliverables to organize your transfer:

• A one-page asset map detailing every business entity, brokerage balance and property, showing titling and who inherits under current signatures.
• A basis sheet classifying each asset as receiving a step-up at death, taking a carryover basis if gifted, or remaining an installment note without a step-up.
• A fairness table calculating each beneficiary's net distribution in after-tax dollars, showing what each child and spouse keeps.
• A beneficiary-designation audit for SEP-IRAs, traditional IRAs, company life insurance and promissory notes, checking that account forms do not override your written intentions.
• A focused list of legal and structural questions prepared for your estate attorney.
• A liquidity projection measuring the exact cash available to a surviving spouse across the first 24 months.

How is an owner's estate plan reviewed as a sale note pays down?

An owner's estate plan is reviewed annually against amortization schedules because each note installment reduces the outstanding principal balance, alters the remaining gain, and shifts the liquid funds available to heirs.

When the third annual check clears, the buyer amortizes principal while the seller reports the gain using IRS Form 6252. The remaining principal drops, reducing the future income stream left to your heirs. Consider a hypothetical example: Ray, 66, sells his machine shop to a key employee for $1,500,000. The structure calls for $100,000 down and $200,000 annual principal payments over seven years (ignoring interest to keep numbers clear). Ray's basis in the company is $300,000, producing a gross profit ratio of 80% ($1,200,000 profit divided by $1,500,000 price). If Ray dies right after the third annual payment, the buyer still owes $800,000 ($1,500,000 minus $100,000 down minus $600,000 across three payments).

An installment note is income in respect of a decedent, so its basis is not reset when the owner dies. Of the remaining $800,000 balance, 80%, or $640,000, is still taxable as capital gain to whoever collects the future checks. If Ray leaves the note entirely to his two adult children from his first marriage, each child gets $400,000 of principal and faces tax on $320,000 of gain. Meanwhile, his surviving spouse, Joan, loses that $200,000 annual cash flow entirely.

Before looking at the table below, compare the 'Joan's income' column directly against the 'Children receive' column: no single option gives both parties the entire asset, requiring a conscious trade-off.

• Receipt of each scheduled installment payment or an unscheduled principal prepayment.
• A marriage, divorce or birth across the immediate family or among major beneficiaries.
• A missed payment, default or requested renegotiation from the business buyer.
• A child facing marital dissolution or creditor claims.
• Relocating your primary residence to a state with its own death tax rules.
• A refreshed enterprise appraisal or a new unsolicited acquisition offer.

Mistakes business owners make in their estate plans

The most damaging mistake in a blended family is relying on a standard will that leaves everything to the surviving spouse outright. Under that arrangement, Ray's remaining $800,000 note passes directly to Joan. Nothing prevents Joan from leaving those remaining checks or accumulated funds to her own relatives, potentially leaving Ray's children with nothing from the company he spent decades growing. A dedicated marital trust solves this problem by providing Joan with life income while preserving the underlying principal for Ray's children.

A second common error involves gifting company shares during life without recognizing the basis rules. Assets held until death receive a step-up in income tax basis to current market value, eliminating the embedded capital gain. Lifetime gifts pass with carryover basis, forcing an heir who sells the business to pay taxes on appreciation generated during your career.

Owners also frequently overlook retirement account paperwork, letting an outdated SEP-IRA or 401(k) beneficiary form sit unchanged for years. Custodial beneficiary designations legally override instructions written in a will. Finally, buy-sell agreements often rely on outdated valuation formulas. If your agreement fixes company value at a low figure from ten years ago, your surviving spouse might be forced to sell shares to your business partner for a fraction of their current worth.

Connecting estate planning to succession, sale taxes and retirement

Business succession planning determines who steps in to manage or purchase the enterprise, while the estate plan decides who inherits the resulting financial value through shares, promissory notes or liquid capital.

Business sale tax planning establishes the structure and timing of an exit, such as an installment sale, after which the estate plan defines who collects the remaining proceeds and pays the accompanying taxes.

Retirement income planning determines what portion of the ongoing note payments Ray and Joan need to support their personal living expenses, leaving the estate plan to transfer whatever surplus remains.

Lifetime gifts connect these disciplines as well. For 2026, the IRS annual gift tax exclusion stands at $19,000 per recipient. Because gifted equity keeps the donor's original purchase basis, the team at EP Wealth Advisors compares that carryover basis against the anticipated step-up at death before recommending any intra-family share transfers. All investments carry risk, and you can lose principal.

How do you begin estate planning with EP Wealth Advisors?

You begin estate planning with EP Wealth Advisors by sending a meeting request through the website. An advisor then sets up a first video or phone call to go over your entity structure, family priorities and the legal documents you already have.

Consultations take place by phone or video for business founders nationwide. To prepare for your first discussion, assemble your current will or living trusts, any operating agreements or buy-sell contracts, recent corporate valuation reports, your promissory note schedules, and copies of your current account beneficiary designations.

EP Wealth Advisors serves clients holding $500,000 or more in investable assets. On October 5, 2026, EP Wealth Advisors reported 390,000 clients and $6.8 billion in client assets. You get the advisory fee schedule on paper before any analysis starts. Your first deliverable is the one-page asset map, which shows who receives the company, the note and each account under the documents in effect today.