Why Entrepreneurs Need an Estate Plan Well Before a Liquidity Event
The plan founders keep putting off, and the freedom that comes once it is in place.
There is an old line about the shoemaker whose own children go without shoes, and the contractor whose own house stays half-finished for years. At MG Financial, we see the same pattern among business founders. Their focus is absorbed by the business, and when it is not, by the family. Estate planning, though clearly important, settles into the category of important but never urgent.
Part of the reason is complexity. A family whose wealth is derived primarily from salary, savings, and marketable investments has an intuitive default: the children divide what remains. Founders have no such default. When most of the family’s wealth is tied up in the business and cash is limited, the choices multiply quickly, making it easy to postpone succession planning for years.
But the complexity tends to fade once the objectives are clear. Whether the goal is to protect your family, preserve optionality, keep the business running through a disruption, or ensure assets continue to be managed according to your values, the structure can be designed accordingly. Define the objective, and the structure follows.
All Your Eggs in the Basket You Built
A founder’s balance sheet is often defined by concentration. Much of their wealth may be illiquid and tied to a single company, and founders frequently remain heavily invested because they have greater conviction in the business’s prospects than a diversified investor would. As a result, many are slower to diversify than conventional portfolio theory would recommend.
Concentration on its own is manageable. The exposure comes from what so often sits beside it: large fixed obligations, and beneath them no will, no named guardians, no liquidity cushion.
Bandwidth is to blame. You can’t wait for a quiet afternoon to draft an estate plan. “The moment they sit down to do it, they’re interrupted seven times,” says Mary Gilligan, CEO and Founder of MG Financial. “You end up neglecting your personal life and focusing on everything else. That’s just normal human nature.”
This raises the question most founders have been putting off.
If Something Happens to You
If you were gone tomorrow, who would own your interest in the company, and who would vote on your behalf? Those need not be the same person.
A surviving spouse and family can receive the full financial benefit of the ownership while the voting interest sits with someone trusted and already involved in the business. That separation protects the family’s economics and the company’s continuity at once, and it spares a spouse from pressure to make decisions they aren’t in a position to make.
Where The Cash Comes From
It also prevents a fire sale of a life’s work under time pressure and grief. Avoiding snap decisions requires liquidity, and when the business is the main asset, liquidity usually means life insurance.
The ordinary rules of thumb, “cover the mortgage or replace a year’s salary,” do not apply here, because no cash may come out of the business for a long time. The figure has to be quantified honestly against what the family will actually need.
At MG Financial, we do not reach for insurance reflexively, and we will say so when it is the wrong tool, but this is a real liability, and life insurance covers it relatively inexpensively. Where a spouse has not been working, the same plan has to replace that contribution as well, including childcare and a realistic path back to work.
Start With the Family, Not the Tax Code
Most conversations about trusts begin with taxes. We think that is backward. The right starting point is the family objective, and the structure follows from it. One should never create an entity (a trust) without a substantive reason. Tax savings can be compelling, but “never let the tax tail wag the dog.”
A well-built trust earns its place only when it serves a real objective. It can:
- Provide professional asset management
- Create flexibility for needs you cannot yet foresee
- Protect a vulnerable beneficiary
- Preserve harmony among heirs
- Communicate the grantor’s intent in a way a lump-sum inheritance never could
Consider a trust funded to cover the education and medical needs of children and grandchildren. Its terms guide future trustees and, just as important, tell beneficiaries how the family’s wealth was meant to be understood and used. The tax efficiency and creditor protection of a well-drafted irrevocable trust are real, but they are byproducts, not the purpose.
Those byproducts are not fixed, though. How large they turn out to be depends heavily on when you act.
The Difference a Year Makes
The same shares, moved at different moments, produce very different outcomes. Two transfers in particular reward timing, and they run on opposite clocks.
Gifts to Family: The Earlier, The Better.
Some of the most consequential estate planning happens before a sale, ideally a year or more ahead of any serious negotiation. Done early and correctly, a meaningful stake can pass to the next generation at a fraction of its eventual value. Mary’s illustration: an owner with a $50 million business who wants $10 million to reach the children might, with the right structure and timing, transfer that interest at a value closer to $3 million.
This is not about giving wealth away before you are ready. It is about capturing a low valuation while the window is still open and aligning with your family’s plans.
The mechanism is valuation discounts. Early on, a minority stake in a private company is valued with reductions for lack of control and lack of marketability, often well below its pro-rata share. As a sale nears and a price becomes known, those discounts fall away, the interest is valued at or close to full value, and the same gift consumes far more of your exemption. “If you wait too close to the deal, you can’t get that low valuation,” Mary says. “You’re going to be stuck at the full value.” There is no hard deadline, so, in our experience, anything within roughly 12 months of a deal is the practical danger zone.
Gifts to Charity: The Opposite Clock.
For appreciated shares going to charity, you generally want to be close to the deal, where the higher valuation produces a larger deduction, and you need to disclose to the buyer who the shareholders will be. But you can be too close. Once the sale is practically certain, or the charity is bound to sell, the IRS treats the gain as yours and taxes it back to you. The sweet spot is close to the deal, but before it becomes a binding or certain commitment.
Both of those moves turn on a single moment: a death or a sale. The next one unfolds over years.
Succeeding Ownership Without Surrendering Control
Succession planning addresses a worry we hear constantly: I want my children to benefit, but they are not ready to run this. They do not have to be.
A common approach is to hold the founder’s shares in an LLC and gradually gift interests in that entity to the next generation, year over year. That passes the economics of the business without handing over voting control, which stays with the founder until the moment it is appropriate to let go. The federal lifetime exemption sits at $15 million per person in 2026, and the annual gift exclusion allows $19,000 per recipient, so spreading gifts across many years can move substantial value with little or no tax friction.
We have guided families through exactly this. In many cases, the business is gifted gradually over years, so that by the time the founder is ready to step back, the next generation already owns and runs it, and control changes hands only when the moment is right. The same principle holds in every version: start from the objective, then choose the mechanism, never the reverse.
The Massachusetts Layer
For founders in Massachusetts, the state adds its own arithmetic on top of the federal picture. Massachusetts taxes estates above $2 million, with rates reaching 16%, a far lower bar than the $15 million federal exemption. That gap pulls in many families who owe nothing federally, and because the $2 million threshold is not indexed to inflation, it captures more estates every passing year.
On the income side, a sale can trigger the state’s surtax, an extra 4% on taxable income above $1,107,750 in 2026, layered on the existing 5% rate. A single liquidity event clears that threshold easily.
Residency planning is real, and there are states with little or no estate tax. But it should be secondary to how you actually want to live. We watch retirees leave for tax reasons and then come back to Massachusetts anyway, knowingly accepting the estate tax, because the medical care they need is here and their families are here.
It is the same principle as the trust philosophy. As Mary says, “Tax planning has to fit your lifestyle. It has to be what’s right for you.” Lifestyle leads, and strategy follows.
The Pieces of Your Wealth Have to Work Together
We’ve spent decades advising founders, CEOs, and entrepreneurs. The value of that history lies less in what we know than in how we listen. Rather than fit anyone into a box, we start by understanding how a particular owner thinks, then build the plan around that. The goal is coordination: the income tax planning, the estate plan, the philanthropy, and the insurance should reinforce one another rather than work at cross-purposes. That last piece includes liability coverage, which is easy to overlook and genuinely consequential at this level of wealth, where exposure can extend even to adult children whose risk traces back to the family’s visibility.
A good plan also has to adapt. Children grow up, circumstances shift, and a family sometimes discovers a need it never saw coming. A child or grandchild with a disability may call for a special-needs trust that provides for their care without putting public benefits at risk. A child’s divorce can expose an inheritance and call for structures that keep it protected. None of these are visible at the start.
So the work is ongoing, and it depends on a team that knows you, your family, and your priorities well enough to see a change before you have to flag it.
Part of the job, frankly, is persistence. When an answer sits outside our walls, a network built over forty years brings the right expert to the table.
Coordination reaches past the family, too. Most founders, even those with hundreds of employees, have a handful of people they want rewarded when the company sells, and there are ways to take care of those key contributors during the deal or beforehand. It is adjacent to estate planning rather than part of it, but it belongs in the same plan, because it reflects the same values.
What Coordination Looks Like in Practice
Consider a hypothetical family business heading toward a sale that had not yet moved ownership to the next generation. Well ahead of any deal, an LLC was created, and shares were transferred into it at a discounted valuation, passing real value to the family while the window was open. The family was philanthropic by nature, so to shelter gains on the other side, a gift of shares to a private foundation was made before closing, producing a major deduction. Every step was coordinated with the family’s business attorneys and CPA and designed with the goal of complying with applicable IRS requirements.
The result balanced a large, tax-efficient transfer to the children with a meaningful reduction in the sale’s cost. None of it was luck. It was timing and coordination.
The Takeaway
Done right, none of this is another burden. Lock it in when the opportunity is there, Mary says, and you gain “the freedom and security to not worry about things,” which is exactly what lets you support your business and family with a clear head.
Founders carry enormous passion and almost no spare bandwidth. They know the planning matters, but it stalls because they never get an uninterrupted stretch to sit down and do it. The right wealth partner’s worth shows up less in any single clever structuring than in the ongoing work of reminding you, making it easy, having your back, and keeping the business and personal sides of your wealth pulling in the same direction. So when the window to plan opens, you take it. Then you get back to the work you love.
If you are building toward a transition or simply sensing that the personal side has fallen behind the business, we welcome a conversation.
This article is for informational purposes only and is not legal, tax, or investment advice. Figures reflect 2026 federal and Massachusetts rules and are subject to change. Please consult qualified advisors about your specific circumstances.
