Equalizing Estate Distributions as a Business Owner

When you’re a business owner with an estate, you have a tough decision ahead of you: how should you distribute it?

Equal is usually considered fair. This is because when everyone gets an equal cut of something, it makes it hard for any of them to argue they were mistreated and to alleviate family discord.

But is equality always fair?

What if one of your children has contributed a lot more to the business than the others? What if one of them took an action that made a real difference to your wealth?

Some assets will have a different value for different heirs. For example, a piece of the business may mean job security or a continuation of the family legacy to the child who contributed more to the business. Whereas for another heir, it might mean a quick liquidation or burden.

How you distribute your estate is up to you, but if a fair distribution is something you desire and you own a closely held business, making the right decision can be challenging.

Here are some solutions when equalizing your estate distributions as a business owner.

Sell the Business

If you plan to sell your business, then you have no problem because cash proceeds are easily divisible.

Things get tricky when you have one or more children with different plans for their futures. Perhaps one of them wishes to succeed you but would still like the others to share in that success, or you have only a few nonbusiness assets to share among them.

So, if you’re in a situation like this, selling the business may not be an option.

Joint Ownership

Also known as joint tenancy, this is a way that two or more people, called joint tenants, can own something together. Each joint tenant owns a piece of the asset and can use it as they see fit.

Joint tenancy allows you to avoid probate, which can be time-consuming and costly. If one joint tenant passes away, the property automatically passes to the surviving joint tenants.

Using this method, you can equalize distributions to your participating and nonparticipating children by granting them joint ownership of your closely held business. As joint owners, they each own an undivided and equal interest in the entire business.

Nonvoting Stock

This is stock that is issued without voting rights. It allows your nonparticipating children to share ownership of the business without having any control over business decisions and operations. 

This can be a good option if one child has taken the lead on following you as a managing owner, but the others deserve to share in its success.

Minority Position with Buy-Sell Over Time

This is a way to pass control of the business to your participating children and draw cash out of the business for distribution to your nonparticipating children. 

The cash is generated by forcing the company to repurchase your shares of stock upon your passing by using a buy-sell agreement.

The major concern here is to ensure your company is in a healthy situation so that the purchasing of its shares for cash doesn’t threaten its position.


A spin-off is a way to leave a portion of your business to your participating children and sell off the remaining portion. Proceeds from the sale will provide cash for your nonparticipating children.

Life Insurance

This is a way to leave the family business to your participating children and leave the life insurance proceeds of equal value to your nonparticipating children.

For example, if your business purchases a life insurance policy that will pay a child $80,000 upon your passing, then leave $120,000 of non-business assets to that same child while leaving the business, valued at $200,000, to a second child, then each child will receive $200,000.

Shareholder Agreement

This can be used to leave equal amounts of stock to each child, ensuring that the stock remains in the family, and allowing children an option concerning their inheritance. 

Participating children have the opportunity to buy their siblings’ stock, while nonparticipating children have the option to sell their stock, but only after offering the participating children the first option to buy.

Will or Trust with Equalization Clauses

A will or trust with an equalization clause directs your executor to equalize treatment among children before making final distributions of your wealth. This works only if you have sufficient nonbusiness assets to distribute to the nonparticipating child.

What Else Should You Consider?

There are several factors you should keep in mind, including:

  • How much control does each child have over the business? Consider who will control the family business and whether that control should be shared.
    • When you transfer business assets to your nonparticipating children, you may also be transferring a degree of control to them, so you will want to determine whether this is appropriate and plan accordingly.
  • What sources of funding are available? Many planning solutions require funding. Often an equalization plan provides that stock must be repurchased or redeemed.
    • The source of funding might be a life insurance policy, future profits of the business, a partial sale of business assets, or the personal savings of your children.
    • The source and availability of funds may be a factor in determining which planning solution you adopt.
  • How will the timing of distributions affect your children? Several planning solutions provide that nonparticipating children receive a stream of payments over years rather than a lump-sum inheritance.
    • Some planning solutions may require participating children to temporarily share ownership of the family business until a future date.
    • Timing considerations should be evaluated per your family’s needs.
  • Is your business likely to remain liquid? The success of several planning solutions is contingent on the future success of the business.
    • Some of your children may be relying on the performance of other children for their inheritance.
    • The degree to which you are comfortable with such an arrangement may help you in choosing a strategy for equalizing distributions.


Between your desire for your legacy, your children’s future well-being, and their relationships with each other, this can be emotionally fraught territory. Knowing how to pick or craft the best option so that you equally satisfy everyone’s concerns is paramount.

As experienced financial professionals, we help clients like you figure out the best strategy for their situation so that they protect their family’s future happiness and success.

Please connect with us and let us help you solidify your family’s future. We would be delighted to go on the journey with you.

Confidence Wealth Management team





© 2024 Confidence Wealth Management LLC. All rights reserved.

Investment Advisory Services offered through Confidence Wealth Management LLC, an SEC registered investment adviser. Confidence Wealth Management LLC (CWM) and Confidence Wealth & Insurance Solutions LLC (CWIS) are two separate affiliated companies. All investment advisory services are provided by CWM. All insurance products and services are provided by CWIS. CWIS does not provide any investment advisory services. CWM does not sell any insurance products. For complete information regarding Confidence Wealth Management’s services and fees, please review our Form ADV Part 2A Disclosure Brochure, which can be found at adviserinfo.sec.gov or requested by calling us at (310) 824-1000. Information provided herein reflect Confidence Wealth Management’s views as of the creation date. Such views are subject to change without notice. Information provided herein is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any securities. No investment decision should be made based solely on any information provided herein. Confidence Wealth Management has not taken into account the investment objectives, financial situation or particular needs of any individual investor. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor’s financial situation or risk tolerance. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. This is designed to provide general information on the subjects covered. Pursuant to its circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that the information given does not give legal or tax advice. Should you have any tax or legal questions, you are encouraged to consult your tax advisor or attorney for any tax or legal matters. Not affiliated with the U.S. Government or any governmental agency.

Terms of Use  |  Privacy Policy

Confidence Wealth Management LLC (CWM) is an SEC registered investment adviser. Confidence Wealth & Insurance Solutions LLC (CWIS) is licensed under the NV Department of Insurance, license no. 3647322. CWM and CWIS are two separate affiliated companies. All investment advisory services are provided by CWM and all insurance products and services are provided by CWIS. CWIS does not provide any investment advisory services and CWM does not provide insurance services. CWM and CWIS have no affiliation with government, state, or local agencies. Consult with an attorney or CPA for usage of tax or legal concepts. This material may contain information that are close approximation to the totality of information available to us and not necessarily specific within regards to one situation or another. Some opinions and statements are informational. They are not investment advice as they may not be complete in terms of all details needed to affect an action you wish to undertake, investment strategy or plan. Pursuant to IRS Circular 230, the material is not intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. No estimates used are a promise of return. Also, many opinions are summaries and may not reflect all pertinent facts relevant to you. Any information given is to be considered general, and nothing said herein should be used as a basis for investment decision unless you consult with your Confidence Wealth advisor that can understand your unique situation and give you a customized solution with a complete disclosure. Past performance does not indicate future results. As you know, no one can predict the future. Thus, any forecast in this material is intended strictly as a possible future outlook and not a statement of fact as there could be any scenarios that are not in your favor when making a decision. You must examine all adverse and negative implications on any forecast when made. All information is based on the date of the material and may not be valid, may change, and/or may not be true any longer as time passes. Also, the Form ADV Part 2A for CWM contains detailed disclosures regarding our services and fees, along with applicable conflicts and how we address such conflicts. A copy of our Form ADV can be obtained by calling (310) 824-1000.

Taxes in Retirement guide


The Guide to Taxes and Your Retirement