Buy Sell Agreements and Trusts

Schedule a Consultation

If you own a business in Atlanta, Georgia, you’ve worked hard to build something valuable. But what happens to that business if you die, become disabled, or decide to retire? Without a clear plan, your co-owners, family members, and employees could be left in a very difficult position. That’s where buy-sell agreements and trusts come in. When these two tools work together, they can protect your business, your family, and your financial legacy. At Slowik Estate Planning, located in Atlanta, Georgia, we help business owners put plans in place that actually work when they’re needed most.

Table of Contents

What Is a Buy-Sell Agreement and Why Does It Matter?

A buy-sell agreement is a legally binding contract between business co-owners. It spells out what happens to an owner’s share of the business when a “triggering event” occurs. Common triggering events include death, disability, retirement, or a voluntary exit from the business. Think of it as a prenuptial agreement for business partners. It sets the rules before emotions and money are on the line.

There are two main types of buy-sell agreements. The first is an entity-purchase agreement, where the business itself buys out the departing owner’s interest. The second is a cross-purchase agreement, where the remaining owners buy out that interest directly. Each structure has different tax consequences, and choosing the wrong one can cost your family significantly.

The U.S. Supreme Court’s decision in Connelly v. United States (2024) made this choice even more important. In that case, the Court ruled that life insurance proceeds held by a corporation to fund a buyout must be included in the company’s value for federal estate tax purposes. This means a poorly structured buy-sell agreement can create a much larger estate tax bill than you expected. A cross-purchase agreement, by contrast, keeps the insurance proceeds out of the company’s valuation because the individual owners, not the corporation, hold the policies.

The bottom line is this: a buy-sell agreement without the right structure and funding plan can do more harm than good. If you have a business partner or co-owner, you need this document. And you need it reviewed by someone who understands both Georgia law and federal tax rules. Reach out to Slowik Estate Planning in Atlanta to make sure your agreement is built to hold up.

How Trusts Protect Your Business Interests in Georgia

A trust is one of the most flexible tools in estate planning. Under the Revised Georgia Trust Code of 2010, found in O.C.G.A. Title 53, Chapter 12, Georgia law gives you broad authority to create and manage trusts that fit your specific situation. A trust can hold your business interest, control how it passes to your heirs, and even protect it from creditors.

For business owners, a revocable living trust is often the first step. You transfer your ownership interest into the trust during your lifetime. You remain in control as the trustee. When you die, your successor trustee steps in immediately, without going through probate. This means your business interest transfers quickly and privately, keeping operations stable during a difficult time.

Under O.C.G.A. § 53-12-20 through § 53-12-28, Georgia law sets out the requirements for creating a valid express trust. The trust must have a clear purpose, identifiable beneficiaries, and a trustee willing to accept the duties. These requirements are straightforward, and meeting them is not difficult with proper legal guidance.

An irrevocable trust offers even stronger protection. Once you transfer your business interest into an irrevocable trust, it generally falls outside your taxable estate. Under O.C.G.A. § 53-12-80 through § 53-12-83, Georgia also allows spendthrift trusts, which protect trust assets from the creditors of your trust beneficiaries. This can be important if your heirs face financial problems down the road. The right type of trust depends on your goals, your business structure, and your family’s needs. An Atlanta estate planning lawyer at Slowik Estate Planning can help you figure out which option makes the most sense for your situation.

Combining Buy-Sell Agreements with Trusts for Maximum Protection

Here’s where things get powerful. A buy-sell agreement and a trust, working together, give you a level of protection that neither tool can provide alone. The buy-sell agreement controls what happens to your ownership interest when you exit the business. The trust controls who receives the proceeds, how those funds are managed, and whether they’re protected from taxes and creditors.

Consider this example (this is a hypothetical scenario for illustration purposes only): Two Atlanta business owners each hold a 50% stake in an LLC. They sign a cross-purchase buy-sell agreement funded by life insurance. Each owner holds a policy on the other. When one owner dies, the surviving owner uses the insurance proceeds to buy the deceased owner’s interest. The deceased owner’s share of the business doesn’t go into probate. Instead, the proceeds flow directly to a trust that was already set up for the deceased owner’s family. The family receives ongoing income from the trust, protected by Georgia’s spendthrift provisions under O.C.G.A. § 53-12-80.

This kind of coordination requires careful drafting. The buy-sell agreement must reference the trust correctly. The trust must be set up and funded before it’s needed. And both documents must be reviewed together to make sure they don’t conflict. Under O.C.G.A. § 53-12-240 through § 53-12-292, Georgia law governs trust administration in detail, and trustees must follow those rules closely.

Slowik Estate Planning works with business owners in Atlanta to make sure these documents work together from day one. Proper trust administration is just as important as the initial drafting. Don’t leave these details to chance.

Funding Your Buy-Sell Agreement: Life Insurance and Beyond

A buy-sell agreement is only as good as its funding. If there’s no money available to buy out a departing owner’s interest, the agreement falls apart. Life insurance is the most common and reliable way to fund a buyout triggered by death. When an owner dies, the policy pays out immediately, giving the surviving owners the cash they need to buy out the estate.

Disability buy-out insurance is equally important. Death gets most of the attention, but disability is actually more common among working-age adults. If a co-owner becomes permanently disabled and can no longer run the business, you need a way to buy out their interest without draining the company’s cash reserves.

Other funding options include installment payments, sinking funds held by the business, and personal savings. Under IRS Publication 537, installment sales allow the gain from a business sale to be spread out over time, which can reduce the tax hit in any single year. However, these arrangements require careful planning to avoid IRS scrutiny. The IRS has flagged certain complex trust-based installment arrangements as potentially abusive, so working with qualified legal and tax professionals is essential.

Georgia law also gives trustees broad investment authority under O.C.G.A. § 53-12-340 through § 53-12-364. If your buy-sell agreement is funded through a trust structure, the trustee must invest those funds prudently. This means balancing risk and return in a way that’s appropriate for the trust’s purpose. Getting this right requires coordination between your estate planning attorney, your CPA, and your financial advisor. Slowik Estate Planning can help you build that team and keep everyone on the same page.

Estate Planning Documents That Work Alongside Your Buy-Sell Agreement

A buy-sell agreement doesn’t exist in a vacuum. It’s one piece of a larger estate plan. For business owners in Atlanta, that plan typically includes several other documents that work together to protect your family and your business.

Your wills and trust documents must align with your buy-sell agreement. If your will leaves your business interest to a child, but your buy-sell agreement requires that interest to be sold to your partner, you have a conflict. That kind of conflict often ends up in probate court, causing delays and family tension. Aligning all your documents ahead of time prevents this problem entirely.

A durable power of attorney is also critical. Under O.C.G.A. Title 10, Chapter 6B, Section 10-6B-48, your agent under a power of attorney can be given authority to manage your business interests if you become incapacitated. This means someone you trust can step in and keep things running, or execute the buy-sell agreement on your behalf, without going to court.

For business owners with unique personal situations, estate planning can extend even further. Some Atlanta business owners have beloved pets they want to provide for. Georgia law allows for pet guardianships and pet trusts that ensure your animals are cared for after you’re gone. While this may seem unrelated to a buy-sell agreement, it’s part of the same comprehensive planning process. Every part of your life deserves thoughtful attention.

At Slowik Estate Planning in Atlanta, Georgia, we take the time to understand your full picture before recommending any documents. We want your plan to work the way you intend it to, not just look good on paper. Contact us today to schedule a conversation about your business and your future.

FAQs About Buy-Sell Agreements and Trusts in Atlanta, Georgia

What triggers a buy-sell agreement in Georgia?

Common triggering events include the death, disability, retirement, or voluntary departure of a business owner. The agreement itself defines which events apply. You and your co-owners choose these events when you draft the agreement. It’s important to think through each scenario carefully because a missing trigger can leave the surviving owners without a clear path forward.

Can a trust own a business interest in Georgia?

Yes. Georgia law allows trusts to hold ownership interests in LLCs, corporations, partnerships, and other business entities. The Revised Georgia Trust Code of 2010, found in O.C.G.A. Title 53, Chapter 12, gives trustees broad authority to manage and hold these assets. If your business is an S corporation, however, the type of trust that holds the shares must meet specific IRS requirements, so careful planning is essential.

How does the Connelly decision affect my buy-sell agreement?

The U.S. Supreme Court’s 2024 ruling in Connelly v. United States held that life insurance proceeds held by a corporation to fund a buyout must be included in the company’s value for federal estate tax purposes. This can significantly increase the estate tax owed by the deceased owner’s family. If your current buy-sell agreement is structured as a corporate redemption funded by company-owned life insurance, you should have it reviewed as soon as possible. A cross-purchase structure may be a better fit for your situation.

Do I need a buy-sell agreement if I’m the sole owner of my business?

If you’re the only owner, a buy-sell agreement in the traditional sense may not apply. However, you still need a plan for what happens to your business when you die or become unable to work. A trust, a succession plan, and a durable power of attorney can all fill that role. A comprehensive estate plan is just as important for sole owners as it is for those with partners.

How often should I update my buy-sell agreement and trust documents?

You should review your documents at least every three to five years, or whenever a major life or business event occurs. Changes in business value, ownership structure, tax law, or family circumstances can all affect whether your current plan still works. The federal estate tax exemption, business valuations, and Georgia statutes can all shift over time. Keeping your documents current is the only way to make sure they do what you intend when the time comes.

More Resources About Trusts for Business Owners

Services

All Services

Testimonials

Jake is a person who really cares about his work. Can't recommend him enough and definitely telling my friends and family about his services.

- Catherine B.