Brian Humes, CPA, Managing Director, Commerce Family Office, St. Louis
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Key Takeaways
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For many high-net-worth business owners, the business you have built and grown may be the most significant asset on your personal balance sheet. The inherent risk of owning a business, no matter what size, often means a great portion of your net worth and your capital has gradually become tied up over the years in a significant yet illiquid asset whose ongoing success is subject to the risks of a privately owned business.
As a result, key questions about personal liquidity and cash flow, wealth concentration, tax liabilities, and estate planning may not be fully incorporated into your broader wealth plan. Coordinated planning to diversify your asset base can help reduce excess concentration of capital in the business. As retirement, succession, or estate planning decisions draw near, these issues become more immediate. Practical guidance from financial planning professionals who understand how business and personal wealth considerations intersect could help you make more informed decisions about the wealth you could realize from your business as your most significant asset, both today and for your legacy.
Evaluating your cash flow and liquidity needs when the business has become both the engine of income and the store of wealth
High-net-worth business owners often need to actively manage cash flow when substantial net worth may not equal liquidity if much of your wealth is locked in illiquid assets, such as business ownership interests or business real estate assets, and your family is dependent on steady company performance as a source of consistent income. A realistic understanding of the income you draw from your business, alongside any other income streams, will help inform how much is truly available to support personal expenses that require consistent cash, such as debt or loan payments, insurance premiums, personal or investment tax liabilities, healthcare needs, tuition for school-aged children, and travel, along with your general lifestyle and spending needs.
If income from the business is uneven or cyclical, being able to absorb those fluctuations can require an additional layer of planning to help manage risks to your personal financial security. Gaining clarity around your personal cash flow needs not only supports covering short-term expenses but can also inform how much income you may want to take from the business and how to strategically time such draws to pursue other financial priorities, such as philanthropic objectives or financial support for family members.
Diversification of your family's capital over time
For many high-net-worth business owners, the company represents a concentrated position of assets within their overall net worth. Many business owners did not plan for their wealth to be concentrated this way. Rather, concentration likely developed gradually, over time. Oftentimes, as the business grows, profits are reinvested or excess cash stays inside the company. Personal savings may have taken a back seat to support the expansion of the business. Retirement planning may have been deferred while you focused on the day-to-day running and operations of the business.
However, at some point, a heavily concentrated position in your business can create substantial risk exposure to your family’s wealth. For some owners, implementing a plan to gradually diversify a portion of capital out of the business and into other assets in a measured fashion over time can help balance your concentration risk. Otherwise, your family’s personal financial security depends heavily on the success or difficulties of the business and the impact on your long-term personal wealth plan if there are unexpected business disruptions that may be magnified.
A balanced allocation that includes other sources of income and more accessible assets can promote both short-term financial stability and longer-term financial security without requiring changes to how you want to operate the business.
High-net-worth business owners face a unique web of tax issues
The interrelated nature of both business and personal assets for a high-net-worth business owner extends to tax issues. High-net-worth business owners may need to navigate a complex web of intertwined tax issues where a decision in one area, such as how your business entity is structured, directly impacts personal income, estate, and state tax liabilities.
How you legally organize your business entity dictates the company’s tax treatment and how deferred or realized gains to extract wealth often need to be treated from a personal income tax perspective. Each type of structure, such as an S corporation (S corp), a C corporation (C corp), a limited liability company (LLC), or a partnership, brings a different tax framework. Business owners will want to take a holistic view of their tax planning strategies to help minimize tax liability across both business and personal levels.
Your compensation plan and how you might take distributions from the business affect your income tax bracket and wealth flexibility. In addition, your situation might allow for advanced retirement planning strategies that complement the general retirement accounts you may have, to help lower your current taxable income while growing your retirement or legacy wealth.
A growing business is often an appreciating asset with respect to tax liabilities, so while the business builds wealth for the owner, it simultaneously expands potential tax liabilities, particularly at the intersection of income and estate taxes. Various trust and gifting strategies, including the use of the federal estate and gift tax exemption, could allow you to transfer business interests or business value to heirs today to potentially reduce your future estate tax liability.
And for an owner whose company transacts business in multiple states, there are additional tax planning complexities related to adherence to multiple state tax rules.
The complexity of these and other tax decisions for high-net-worth business owners lies in their interdependence. How to best structure your business assets, your compensation, your estate plan, and take advantage of available tax deductions and exclusions to protect the business and the wealth you have grown requires a strategic tax plan.
The fiduciary advantage of using a trust to hold business interests
Holding your business or business interests in trust, rather than owning your business personally, may provide estate and tax planning benefits. Trusts can play an important role in integrating business assets into an estate plan, guiding how business ownership is transferred or how proceeds from a business exit are managed over time.
The trust document can include specific provisions addressing how the business should be managed, who may participate in business decisions, and how income or ownership is treated during a transition period. Assets properly titled in the name of a trust generally avoid probate, which can help reduce delays, administrative costs, and potential business disruptions during a transfer of ownership.
If a liquidity event occurs, using a trust can help guide how proceeds are used for beneficiaries in accordance with the owner’s wishes, whether to specify that distributions begin when a beneficiary has reached a certain age, to support specific expenses for the beneficiary, such as health and education costs, or to preserve assets for future generations. By formalizing how these intentions are executed within a trust document, owners can provide for how their legacy planning goals are funded with the proceeds from exiting the business.
A corporate trustee can serve as a neutral party with fiduciary responsibility for carrying out the terms of the trust and administering the business interest in trust according to the business owner or trust grantor’s stated intentions. A corporate trustee’s responsibilities may include governance and monitoring of privately held assets in the trust with a focus on preserving value, acting in the best interests of beneficiaries, and communicating related findings and decisions to the grantor and beneficiaries.
A corporate trustee can provide long-term consistency when it comes to these administration responsibilities, particularly of benefit when family dynamics or future uncertainties are involved, as the corporate trustee is obligated to adhere to the terms of the trust document to carry out the grantor’s intentions in an impartial manner.
A revocable trust allows the grantor, while living and still competent, the right to make modifications to the trust document, thereby retaining a degree of control over the assets held within the trust. Because those assets remain part of the grantor’s taxable estate, the assets may receive a step-up in cost basis at the grantor’s death, which can reduce capital gains taxes if the assets are later sold. However, since the business remains part of the owner’s taxable estate, the assets will be included in determining the owner’s estate tax liability.
Irrevocable trusts are often considered when estate tax planning is a priority. Transferring business interests to an irrevocable trust can help shift future appreciation outside of the taxable estate, effectively locking in today’s value of the business for transfer tax purposes if properly structured. When using an irrevocable trust for estate tax planning, careful structuring of the trust document is important, as once an irrevocable trust is established, unlike with a revocable trust, the grantor’s ability to modify the trust document is generally limited and the grantor typically relinquishes a degree of control over the trust assets.
Working with a qualified estate planning attorney to establish the appropriate type of trust, aligned with the overall estate and tax objectives of your family’s wealth plan, can help guide how transferred interests serve your legacy goals and that the intended estate tax benefits are preserved.
Key financial and retirement planning decisions require a clear valuation of the business
A well-structured retirement plan typically begins years before you actually transition ownership of your company. The manner in which you exit the business can significantly influence retirement outcomes. Without a clear understanding of the value that could be realized from the sale or transfer of the business, unrealistic assumptions that either overestimate or underestimate the value of your company create implications for planning and could inadvertently impact sensitive family dynamics regarding an eventual transition plan.
Admittedly, it can be difficult for a business owner to separate the emotional significance of a business from its actual market value. For many business owners, the company is their life’s work and is intertwined with their personal sense of purpose and family legacy, sometimes making it difficult to objectively evaluate the value of the company.
If a sale or ownership buyout is anticipated, overestimating potential proceeds, whether received in a lump sum or over time through an installment structure, could create a significant gap in how your retirement lifestyle will be funded. External factors beyond your control, such as a shift in industry demand or industry consolidation over time, may also potentially impact the value of your business in a negative manner when it comes time to exit or sell. And while you are actively running the company, decisions around how much to draw from or reinvest in the business may not be fully informed. Such overestimation scenarios could ultimately result in you not being able to realize the liquidity out of your business that you were expecting.
Underestimating the value of your company has its own planning implications. Underestimating the value of your company could result in unexpected tax liabilities that have not been adequately funded, whether those be income or capital gains taxes now, or for considering strategies to reduce potential estate taxes by diverting or shifting the value of the business away from your personal estate before the sale closes. If the cash you realize after exiting the business is significantly more than you expected, you may also find there are unexpected funds to boost your post-retirement liquidity or add to your legacy.
Many owners feel a strong sense of responsibility to the business and may choose to remain actively involved for longer than initially planned. While that commitment is often a reflection of dedication, in some cases, it can affect succession readiness or the company’s perceived market value to an outside buyer if too much responsibility remains concentrated in one individual. For sound contingency planning, as well as for your transition plan leading up to your retirement or exit, it is important to have a succession plan to gradually delegate key responsibilities or make strategic hires to strengthen the leadership team and help reduce the risk that the company’s continued success appears overly dependent on your personal involvement, which could severely impact the value of your business in transition.
With a clear understanding of the value of your business, you may be better positioned to contemplate and plan how your finances should be managed gradually leading up to exiting the business and when your retirement or exit occurs. The more time you have to plan, the more proactive you and your wealth team can be at effectively aligning your lifestyle and legacy goals with strategies for tax efficiency at retirement or exit. Considerations for how your family’s capital is deployed when you shift from a mix of active business assets and personal assets to a state where your company wealth has been realized and absorbed into your broader wealth plan present a different set of circumstances.
Estate and legacy planning considerations for business owners
Clear communication around your intentions for the business when planning an eventual transfer or exit is an essential part of estate and legacy planning. Engaging in exit planning early and discussing your direction with family members and co-owners or investors, if applicable, can help set expectations with those close to you and increase the likelihood that your intended outcome for the business is carried out as planned.
If you intend to transfer the ownership and operation of the business to your children, you may consider formalizing plans for the transition through family governance documents or structured family discussions to create a shared understanding, align expectations, and prepare children for taking on the responsibilities of the business. Family governance mechanisms can also be effective in fostering engagement in certain business matters across generations, including those who may have their own primary career or business interests outside of the family business.
Having a compensation committee in place with the right balance of independence, who can review compensation plans for working family members, can be useful in matters of fairness and to maintain stability when there are family dynamics or when retaining non-family executives could be a concern.
If company stock is held in trust for children to inherit, yet there are children who are not active in the day-to-day business operations of the company, nor do they intend to be in the future, it may make sense to consider whether a dividend policy or other approach could help provide a financial benefit to those children, rather than leaving them solely with an ownership interest that may be illiquid for their circumstances. These are the types of thoughtful estate planning discussions with your children that can foster a positive family dynamic if there is open communication among the family and adequate time to put the right plan in place.
A comprehensive estate plan should also address how surviving family members will be supported financially and what you intend for the business after your passing. Without coordinated planning, your family’s liquidity needs and important decisions pertaining to the business may be left unresolved during an already difficult time.
Where business ownership intersects with personal purpose
Aligning your business plans with your family’s broader wealth and legacy goals often involves holistic planning across multiple financial disciplines. Your business is too significant an asset to approach in isolation. Without a clear understanding of the interrelated nature of your business and personal wealth, important planning decisions such as the company’s ownership structure, tax strategies, succession and exit planning, and how a trust can protect and facilitate intergenerational transfer, may be made without a complete picture.
At Commerce Trust, your private wealth management team is comprised of specialists who can proactively plan for your family’s liquidity needs, your business and personal tax situation, advise on business succession and exit planning, as well as how your business could be held in trust to help protect and grow the company as an asset for an eventual sale or intergenerational transfer. We can serve as corporate trustee to maintain continuity and reinforce your control over the business, while guiding delicate family discussions related to ownership and succession. Your Commerce Trust team will work to orchestrate these elements into a cohesive strategy tailored to support both your business objectives and secure your personal legacy.
Contact Commerce Trust today to learn more about how our holistic, team-based approach can help build a comprehensive wealth plan tailored to the unique circumstances of a high-net-worth business owner.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.
The opinions and other information in the commentary are provided as of May 13, 2026. This summary is intended to provide general information only and may be of value to the reader and audience.
This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified tax advisor or investment professional. While Commerce may provide information or express opinions from time to time, such information or opinions are subject to change, are not offered as professional tax, insurance or legal advice, and may not be relied on as such. Consult a tax specialist regarding tax implications related to any product and specific financial situation. Consult an attorney for legal advice, including drafting and execution of estate planning documents.
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