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Sponsored by: Clearstead Trust
Updated: 2 days ago

The Role of Trusts in Business Succession

Trusts are versatile planning tools for business owners and can aid them in ensuring a thoughtful business succession. A Trust can provide business continuity during uncertain times, determine clear direction for the next generation of owners or managers, and allow for tax-favorable estate planning.

1. How can a Trust help create business continuity?

Nicolas Carter, JD, CTFA, Chief Fiduciary Officer, Clearstead Trust

A Trust can be used for many different purposes, but an often-overlooked aspect of a Trust is its potential for business ownership. Maine is a great state in which to run a business and due to its favorable trust laws, a Trust can be a viable option for ownership interests of small businesses. Trusts are specifically designed to outline a line of succession for management of the Trust and its assets. Through this built-in mechanism, a Trust can easily be used to provide for appointment and direction of the next generation of owners or managers. A Trust requires that there always be an acting Trustee, so even in the unfortunate circumstance of a business owner’s death or incapacity, a Trust can outline how decisions can be made quickly and leadership roles should be filled.

2. Does a Trust create clear direction for future generations?

Often, business owners and their families fail to discuss what will happen as business ownership transitions to the next generation. Sometimes a business will have an Operating Agreement that doesn’t envision having co-owners that aren’t part of the daily operations of the business. A Trust can provide stability to the management of the business while also providing the benefits of ownership to co-owners not interested in running the business. Provisions can also be drafted in a Trust to assist the next generation of owners through a sale or liquidity event. Examples of these provisions could be detailing how a family member interested in continuing in the business could buy out co-owner family members or naming which trusted advisors should be consulted when a sale or merger is proposed.

3. Can a family use a Trust for Estate Planning?

A Trust can easily be used for Estate Planning, and it can be drafted as part of Buy-Sell Agreement or a Shareholders Agreement. Trusts can serve to provide the liquidity needed for family members to maintain their lifestyle while a sale happens or even provide the funds to buy out the ownership interests of family members.

But many business owners are unaware of the many ways that a Trust can assist in the transfer of a business while they continue to run day-to-day operations. Certain transfers of ownership interests to a Trust can lock in the valuation of a business now, removing future appreciation from the business owner’s estate. A transfer to a Trust could also provide a roadmap for a business owner to step back and allow others to learn and grow into the daily management of the business, without the worry of mismanagement causing loss of value for the owner’s family.

Ready to Start the Conversation?

Clearstead Trust is a Maine-chartered non-depository trust company based in Portland, Maine, and supported by the extensive resources of its parent company, Clearstead Advisors, LLC. We specialize in helping business owners navigate every phase of a liquidity event—before, during, and after the sale. From deal structuring and tax minimization to family preparation and philanthropic strategy, our team brings the foresight, tools, and experience to make your next chapter a success. If you’re beginning to think about what comes next for you and your business, there’s no better time—or team—to start the conversation.

The information provided is general in nature, is provided for informational purposes only, and should not be construed as financial or legal advice. The views expressed by the author are based upon the data available at the time the article was written. Any such views are subject to change at any time. Clearstead disclaims any liability for any direct or incidental loss incurred by applying any of the information in this article. All financial decisions must be evaluated as to whether it is consistent with your objectives and financial situation. You should consult with a financial, tax or legal professional before making any decisions.