Family Tax Planning Strategies For Business Owners To Preserve Wealth

Forbes

09-04-2025

Barbara Schreihans, CEO and Founder of Your Tax Coach.
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Business owners: Imagine your wealth creating a financial strategy that is passed down, improved upon and, most importantly, protected through generations. This is not just about saving money; it's about creating a financial plan that shields your hard-earned cash from unnecessary tax loss.
Here's one game-changing strategy many business owners miss: strategically employing family members.
Because when you hire family members in your business, that means you can shift income to a lower tax bracket, provide them real work experience, potentially eliminate taxes on their earnings, and help them fund future education or investments.
Pro tip: Make sure the work is legitimate and documented.
Once you start employing family members, you may also want to start learning about the world of family trusts.
Because you need to understand this: Family trusts aren't just for mega-millionaires. They're powerful tools that can protect assets from potential future legal challenges, provide tax-efficient wealth transfer and give you more control over how and when your assets are distributed.
I think everyone should have a revocable living trust and will so that you can avoid the headache and legal battle of probate—and then as your assets, net worth and business grows, consider adding in other types of trusts.
They're just another tool in your financial strategy plan that can help you move wealth to the next generation while minimizing tax impact.
Now here's one of your most important wealth building strategies—retirement accounts.
But don't just think of retirement accounts as a way to ensure you'll be comfortable at an older age. I recommend you really think of these accounts as a wealth multiplication tool.
With smart planning, these can become generational wealth builders. Meaning, if your children have earned income (which they have because remember you have already hired them), then you can strategically contribute to their Roth IRAs.
For yourself, you might consider utilizing backdoor Roth conversion strategies, which can help you move funds into a Roth IRA even when your income exceeds traditional contribution limits.
Bonus: Roth IRAs don't have required minimum distributions like other retirement plans, which make them more attractive.
Another really important family tax planning strategy is the gift tax—because if you have children, you're no stranger to buying gifts for them. Which would make the annual gift tax exclusion your friend.
For 2025, you and your spouse can each gift up to $19,000 per person without having to file a gift tax return. Multiply that across family members, and you're moving significant wealth tax-efficiently.
When you're creating a strategic family tax plan, it's important to note that your business structure may be one of the most important tax strategies you have.
That means, if you're not currently structures as an S corporation, take some time to look into whether this business structure makes sense for you. It offers business owners a strategic approach to potentially reducing self-employment taxes by allowing owners to be both shareholders and employees.
Because when you're carefully structured, the right business entities can open up more tax-efficient income distribution, allowing families to optimize their overall tax strategy and preserve more of their hard-earned wealth.
Here's what you should know:
• Family tax planning isn't about finding loopholes. It's about creating a strategy that protects your assets, minimizes tax burden and sets up future generations for success.
• While these strategies are powerful, they're not one-size-fits-all.
• Tax laws are complex and change frequently.
• What works for one family might be less effective for another.
Partnering with a tax professional who specializes in family wealth planning can help you develop a strong financial strategy. (Disclosure: My company helps with this, as do others.) It's important to review your current tax approach as an ongoing part of your business, ensuring your strategy remains aligned with your evolving family and business goals.
Most importantly, approach your tax strategy with a long-term lens, looking beyond immediate tax savings to create a comprehensive wealth preservation plan that supports your family's future aspirations.
Remember, the goal isn't just to save money: It's to build a financial legacy that supports your family's dreams, provides security and creates opportunities for generations to come.
Your wealth story starts now. Make it a bestseller.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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