Entrepreneur Estate Planning: 2026 Guide

Short answer: A will alone does not protect a business, because a will only takes effect after a probate court validates it, and California’s statutory probate fees run on the gross value of everything in the estate, including your business interest, before any debts or the mortgage on the shop are subtracted. On a $1,000,000 estate, the statutory schedule produces $23,000 for the executor and a separate $23,000 for the estate’s attorney, or $46,000 in ordinary fees before the business sees a distribution. A funded revocable living trust that actually holds your business interest, paired with a valid power of attorney, keeps ownership and decisions with the people you choose instead of a probate court.

Why does a will alone put a business at risk?

A will is not a plan that avoids probate. It is only a set of instructions that a probate court has to validate before anyone can act on them. Probate Code § 13100 sets the threshold for formal probate at estates worth more than $208,850 in gross assets, for deaths on or after April 1, 2025, and most California businesses worth keeping clear that bar easily once you count equipment, receivables, real property, and goodwill.

Once an estate is in probate, the statutory fee schedule under Probate Code §§ 10800 and 10810 pays the executor and the estate’s attorney identical percentages of the gross estate: 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000, and smaller percentages above that. Those fees run on gross value “without reference to encumbrances,” so a business loan or a mortgage on the commercial property does not reduce what gets paid out. While that process runs, which the California Courts Self-Help Guide describes as typically taking 9 to 18 months, your business is a probate asset subject to court oversight rather than something your successor can simply run.

How does a living trust actually protect a business owner?

A funded revocable living trust avoids probate because the trust, not you personally, holds legal title to what you put into it. For a business owner, that means the trust document has to actually own the asset: your membership interest in an LLC, your shares in a corporation, or the deed to the building the business operates from. A trust that exists on paper but was never used to retitle the business interest does not avoid probate for that interest. It sits outside the trust just like it would if you had no estate plan at all.

Funding is the step people skip, and it is the step that matters. An attorney who handles trust funding as part of the engagement, not just the trust document itself, is doing the part of the job that keeps a business out of probate court later. A trust also does not change what you owe. Debts, taxes, and business obligations still have to be paid out of the trust or the business before anyone else receives a distribution.

Who runs the business if you are alive but can’t act?

Probate and a living trust both deal with what happens after death. Neither one answers the question of who signs a contract, approves payroll, or negotiates with a lender if you are incapacitated but still alive, whether from an accident, a stroke, or a serious illness. That gap is filled by a properly executed power of attorney naming someone you trust to act for you, and separately, by clear authority written into your trust for your successor trustee to step in and manage trust-held business assets without a court proceeding.

Without that document in place, the people around your business, employees, partners, a bank, may have no one with clear legal authority to act, and getting a court to appoint someone can take time your business does not have. A power of attorney should be drafted specifically enough to cover business decisions, not just personal finances, and it should be paired with instructions your successor can actually follow.

What happens to taxes when you transfer or pass down the business?

The 2026 federal estate and gift tax exemption is $15,000,000 per person, or $30,000,000 for a married couple, made permanent under the One Big Beautiful Bill Act. Most business owners never come close to owing federal estate tax because of that exemption, but the business is still counted toward it at your death, along with everything else you own, so a valuation matters more the larger the company gets. California itself has no state estate tax and no state inheritance tax.

If you are gifting pieces of the business to a child or a successor during your life rather than waiting until death, the 2026 annual gift tax exclusion is $19,000 per recipient, per donor, or $38,000 for a married couple who elects to split gifts. Gifts above that amount require a Form 709 but generally trigger no tax owed until your cumulative lifetime gifts exceed the $15,000,000 exemption. One tradeoff to know before you gift instead of leaving the interest at death: a gift carries your original basis in the business interest to the recipient, while an interest that passes at death generally gets a step-up in basis to fair market value on the date of death under Internal Revenue Code § 1014. That difference affects what your successor pays in tax if they later sell.

What are the most common mistakes business owners make?

The most expensive mistake is treating a will as the whole plan and never funding a trust with the business interest itself. The second is leaving the power of attorney vague or generic, so it does not clearly authorize the kind of business decisions that actually come up. The third is not updating the plan when the business itself changes: a new partner, a new entity structure, a buyout, or a jump in valuation can all make an old plan obsolete even though nothing about the owner’s personal life has changed.

Figures verified July 2026.

What to do next

Pull together what you actually own: the entity documents, any partnership or buy-sell agreements, and a rough sense of what the business is worth today. Bring that to an estate planning attorney and ask directly whether your current plan, if you have one, actually holds title to the business or just talks about it. If there is no trust, or the trust was never funded, that is the gap to close first.