Estate Equalization: When Some Heirs Aren’t in the Business
Oct 16 2025 15:34
🏛️ Estate Equalization: When Some Heirs Aren’t in the Business
 
By the Attorneys at BarthCalderon LLP
 
The Family Business Dilemma
 
When clients walk into our office, we often see the same look in their eyes — pride in what they’ve built and concern about what comes next.
 
Recently, we met with Tom and Maria, owners of a thriving construction company they built from scratch over three decades. Their business wasn’t just a financial asset — it was their identity, their retirement, and their family’s story.
They had three adult children. Jacob, the oldest, worked full-time in the company and was clearly the future successor. Sophia, their middle child, lived out of state and built a career in finance. Ella, the youngest, was a teacher with no interest in the business.
 
Tom and Maria’s question was one we hear often:
“How do we pass the business to Jacob without creating conflict or unfairness for his sisters?”
It’s one of the most challenging — and emotionally charged — issues in estate and business-succession planning.
 
When ‘Fair’ and ‘Equal’ Aren’t the Same Thing
 
Many parents naturally want to “divide everything equally.” But when most of a family’s net worth is tied up in a business, equal doesn’t always mean fair.
 
If the company represents 70% or more of total wealth, dividing ownership among children — including those not active in the business — can create tension.

Non-working heirs may push for dividends, while the active heir wants to reinvest profits. The result can be years of disagreement and even forced sales.
 
We’ve seen it happen countless times. The good news is: with the right planning, you can avoid it.
 
Case Study: The Builders Who Planned Ahead
 
For Tom and Maria, we built a plan that balanced financial fairness, business continuity, and family harmony. Here’s how:
 
1️⃣ Independent Business Valuation
We started with a formal valuation to determine the true market value of their construction company. You can’t plan fairly without knowing what you’re dividing.
 
2️⃣ Business Succession Agreement
We crafted a buy-sell agreement allowing Jacob to gradually acquire ownership, partly funded through life insurance. The parents retained control while setting a clear transition roadmap.
 
3️⃣ Trust-Based Equalization
Their living trust was revised so that non-business assets — investment accounts, rental properties, and insurance proceeds — flowed primarily to Sophia and Ella. That achieved balance without forcing a business sale.
 
4️⃣ Life Insurance to Fund the Gap
A second-to-die life policy provided liquidity at death, ensuring non-business heirs received equal value without draining business assets.
 
5️⃣ Entity Structuring for Protection
Ownership was organized under a Family Limited Liability Company (FLLC), offering liability protection and a clear governance structure with defined voting rights and buy-out terms.
 
6️⃣ Family Communication Session
Finally, we facilitated a family meeting where Tom and Maria explained their intentions. Transparency turned potential resentment into understanding.
The result: their business stayed intact, their children stayed close, and their legacy remained unified.
 
Key Takeaways
  • Valuation is essential — fairness starts with accurate numbers.
  • Trusts and insurance create flexibility when assets aren’t easily divisible.
  • Entity structure protects everyone and sets clear expectations.
  • Communication prevents surprises that can tear families apart.
Why This Matters Now
 
Estate equalization isn’t just about dividing assets — it’s about preserving family harmony and protecting the business you’ve spent a lifetime building.
With interest rates, tax laws, and business valuations shifting, now is the time to review your structure. Waiting until retirement or illness can limit your options and increase conflict.
 
Next Step: Get a Complimentary Planning Assessment
 
If your estate includes a closely held business and you have heirs with different levels of involvement, our attorneys at BarthCalderon LLP can help you build a plan that protects both your company and your family relationships.
 
💼 Schedule a complimentary planning assessment with one of our attorneys today. We’ll meet with you privately over Zoom to review your goals, identify risks, and outline smart strategies for equalization, succession, and protection.
 
📅 Click below to schedule your Zoom assessment:
👉 Book Your Complimentary Planning Assessment