Many business owners hope to keep their company in the family. In the 2025 Trends in Trust and Estate Planning survey, sponsored by Bank of America, a clear majority of attorneys and advisors said their clients wanted to pass their business interests to the next generation.

Fulfilling that goal requires careful planning about which family members should take over, how and when to cede control and how to ensure business continuity, protect assets and achieve tax efficiency. “Because they’re so busy running the company, owners often delay succession planning,” says Jennifer Galvagna, Head of Trust, Estates and Tax at Bank of America. “The earlier you start planning, the more likely you are to achieve your goals.” 

Many survey respondents cited trusts as an important tool in this process, noting that trusts may help business owners accomplish a variety of objectives, including these four specific goals.

1) Ensuring family ownership and control of the business

Two critical facets of business succession—ownership succession and management succession—can be related but sometimes proceed separately. If a company is sold in its entirety to a third party, complete ownership and the right to run the company transfers to the buyer. Succession within a family often happens differently. For example, parents may choose to begin transferring an ownership stake to their children while retaining the right to manage the company. That can be done by gifting non-voting shares directly to the next generation or having those shares held in trust for them. In either case, the objective is to remove part of the equity in the company from the parents’ estates without giving up the controlling interest that enables the parents to continue to have management control.

Often, the senior generation may decide to hold the controlling equity in a revocable trust that can be modified or canceled. “A revocable trust is great at keeping assets out of probate and provides ample flexibility for defining the succession of decision-making,” says Andrew Tanner, Specialty Asset Management, Business Owner Transition Specialist, Bank of America Private Bank. The current owner or manager can establish a trust to hold the controlling equity while also serving as trustee. But the owner can also name a co-trustee or successor trustee to take over if the owner is incapacitated. And the owner can update the trust to adjust for changes in the roles and readiness of the next generation to run the company someday.

Consider a couple preparing to transfer their wealth to their three adult children, one of whom works in the business and is slated to take over several years in the future. If the parents want to continue their day-to-day management of the business, they could create a revocable trust and retain the controlling equity through voting rights, along with the authority to make business decisions, Tanner says. The remaining non-voting equity could go to the children, each of whom would receive an equal non-voting interest.

But as useful as a revocable trust can be, it isn’t designed to address many of the goals of formalizing a succession plan for your business. Those objectives are likely to include minimizing gift and estate taxes and providing legal protections. An irrevocable trust, which can’t easily be modified, sets out your plan for maintaining the legacy of your business and keeping it under family control. It provides a legal framework for your business moving forward, specifying parameters for ownership and control of the business and naming a trustee or trustees and successor trustees to ensure that the current generation’s wishes are achieved. 

2) Protecting assets 

A family’s business is likely to be its most valuable asset—and the most likely target of those who may assert legal claims against family members or the company. In the Trends in Trust and Estate Planning survey, over half of the respondents cited asset protection as a reason their clients hold family businesses in trusts. “Putting shares of the company or other business assets into an irrevocable trust typically will provide beneficiaries with creditor protection—from bankruptcy, divorcing spouses and other financial threats to the business owner and their family,” says Michelle Weinstein, Wealth Strategies Advisor, Bank of America Private Bank. 

3) Providing business continuity

Trusts can also help keep a business operating at peak efficiency during times of transition. “A lot depends on choosing the best managers to succeed you, of course,” Tanner says. “Depending on the form of the business—a corporation, LLC or partnership—a trust holding a controlling interest can ensure that the right management team is always in place and effectively overseeing the company, which helps provide business continuity.” A trustee can help manage separate business assets, provide clear communication to family members and managers of the business and navigate any challenges that arise. 

Much depends on who takes the trustee role, and you need to be very thoughtful about selecting the right person or people, emphasizing qualities such as reliability and diligence and looking for someone with whom you can have a comfortable working relationship. “You might choose one of the kids, a close friend, a business or trusted advisor or a corporate trustee,” Weinstein says. 

4) Minimizing the tax impact

The tax cost of transferring business assets to the next generation can be steep for companies whose value exceeds the current maximum U.S. gift and estate tax exemption of $15 million for an individual and $30 million for a couple for 2026. Reducing those tax costs for their clients was cited as a priority by 36% of respondents to the Trends in Trust and Estate Planning survey.

“You don’t have to move all of your business into a trust, but it makes sense to use as much of the exemption as you can during your lifetime,” Galvagna notes. Transferring assets to a trust relatively early may pay additional dividends. The current value of those shares will be removed from your estate, and if the value of your business grows, your beneficiaries will realize that benefit without paying more taxes.

Another advantage of planning with business interests is that you may be able to use the discounted value of non-voting business shares to leverage your gift tax exemption and move a larger share of the business into the trust. Non-voting business shares transferred into a trust may be discounted for tax purposes because of their lack of control over the business and their lack of marketability, both of which shrink the value of the gift.

Even with today’s sizable exemption amounts, larger companies may be subject to estate tax liabilities, and it’s important to plan for those potential costs and to make sure the liquidity needed to pay the estate tax is available. A $100 million business, for example, could generate a steep estate tax bill due within nine months of the death of the owner. Looking to the company as a source of liquidity to pay those taxes could drain needed capital. It’s also important to remember that business assets that have been moved into a trust can’t be tapped to pay estate taxes, Galvagna notes.

Placing a business in a trust may also subject the company’s earnings to higher income taxes. Trust income above $15,900 in 2026 is taxed at 37% for federal purposes—higher than the rate on businesses and equal to the top rate for individual income. Because of this potential for higher taxes, Weinstein suggests considering a grantor trust, a common trust structure for both revocable and irrevocable trusts. Such a trust would allow the business owner to remove business assets from their estate, potentially reducing gift or estate taxes. Yet with a grantor trust, the grantor (i.e., the business owner) continues to pay income tax on behalf of the trust even though the income is being generated by assets owned by the trust. This may prove to be beneficial if the business owner is taxed at a lower rate than the trust. Plus, payment of these taxes is not considered a gift by the grantor and therefore uses none of the grantor’s gift and estate tax exemption. Because the trust pays no taxes, this structure also provides the added benefit of helping the trust to grow outside of the business owner’s estate.