Closely Held Businesses and Trust Planning

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If you own a closely held business in Atlanta, Georgia, you already know how much work goes into building it. But have you thought about what happens to it when you’re gone? Without a solid plan in place, your business could end up in probate, face unnecessary tax exposure, or get tied up in family disputes. At Slowik Estate Planning, located in Atlanta, Georgia, we help business owners protect what they’ve built using trust-based strategies that are grounded in Georgia law and federal tax rules. This page walks you through the key issues every closely held business owner in Atlanta should understand.

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Why Closely Held Business Owners in Atlanta Need Trust Planning

A closely held business is typically owned by a small group of people, often family members or a tight circle of partners. These businesses are common throughout Atlanta and the rest of Georgia. They include family-run LLCs, S corporations, partnerships, and professional practices. What makes them different from publicly traded companies is that there’s no open market for the ownership interests. That creates unique challenges when the owner dies, becomes incapacitated, or wants to retire.

Without a tailored estate plan, a business owner’s death or incapacity can trigger probate delays, tax inefficiencies, and family disputes, potentially jeopardizing the very enterprise they spent years building. That’s a real risk for Atlanta business owners who have poured decades into their companies.

Trust planning gives you a way to address these risks head-on. Under the Revised Georgia Trust Code of 2010, codified at O.C.G.A. Title 53, Chapter 12, Georgia law provides a strong framework for creating and administering trusts. Article 2 of that chapter, O.C.G.A. §§ 53-12-20 through 53-12-28, governs express trusts, which are the kind most commonly used in business succession planning. When you place your business interest inside a properly drafted trust, you set the rules for what happens next, on your terms, not a probate court’s.

Probate is a public process, but trusts are not, keeping your business matters out of public scrutiny. For many business owners, that privacy alone is worth the effort of setting up a trust. Your ownership stake, your business value, and your succession plan stay private when you use a trust instead of a will alone.

Slowik Estate Planning works with closely held business owners across Atlanta to build trust plans that actually reflect how the business works and what the owner wants to happen next. If you’re a business owner who hasn’t looked at your estate plan recently, now is the right time to start. Contact our Atlanta, Georgia office to schedule a consultation.

How Georgia Law Governs Trusts Used in Business Planning

Georgia’s trust law is detailed and business-owner-friendly when you know how to use it. The Revised Georgia Trust Code of 2010, found at O.C.G.A. Title 53, Chapter 12, covers everything from how a trust is created to how it’s administered, invested, and eventually terminated. Understanding a few key sections helps you see why trusts are such a powerful tool for closely held business owners.

Article 11 of the Trust Code, O.C.G.A. §§ 53-12-200 through 53-12-221, sets out the duties and powers of trustees. A trustee managing a business interest held in trust must act prudently and in the interest of the beneficiaries. This matters a lot when the trust holds something as complex as a business ownership stake. The trustee needs clear authority to manage, vote, or even sell the business interest when appropriate.

Article 16, O.C.G.A. §§ 53-12-340 through 53-12-364, covers trust investments. Georgia follows the prudent investor standard, which means the trustee must invest and manage trust assets with the care of a prudent investor. When the trust holds closely held business interests, this standard requires careful attention to diversification and risk management.

Article 5, O.C.G.A. §§ 53-12-80 through 53-12-83, covers spendthrift and discretionary trusts. A spendthrift provision in your trust can protect the business interest from creditors of your beneficiaries. If you’re passing a business to a child or other heir and you’re worried about their creditors or a potential divorce, a spendthrift trust can add a layer of protection that a simple bequest cannot provide.

Article 3, O.C.G.A. §§ 53-12-40 through 53-12-45, governs revocation and modification. If you use a revocable living trust, you can change or cancel it at any time during your life. That flexibility makes a revocable trust a good starting point for many business owners. As your business or family situation changes, your trust can change too. An estate planning attorney in Atlanta can help you decide whether a revocable or irrevocable structure best fits your goals.

Grantor Trusts, S Corporations, and the Tax Rules You Need to Know

One of the most common questions we hear from Atlanta business owners is: “Can I put my S corporation shares in a trust?” The answer is yes, but the rules matter. S corporations are pass-through entities, meaning income and losses flow through to shareholders. The IRS has strict rules about what kinds of trusts can hold S corporation stock without causing the company to lose its S election.

In the case of a shareholder who wishes to pass along their shares of an S corporation, a popular option is to transfer these shares into a grantor trust while the owner is alive, with the trust or a subtrust set to hold these shares for the benefit of others upon the grantor’s death. During the grantor’s lifetime, a grantor trust is a permitted S corporation shareholder. But after death, the trust has a limited window, usually two years, to convert to a qualifying trust structure.

The two main options after the grantor’s death are an Electing Small Business Trust (ESBT) or a Qualified Subchapter S Trust (QSST). Understanding the structural and tax implications of using ESBTs and QSSTs is essential for business owners and estate planners seeking to preserve S corporation status while facilitating smooth business succession.

For grantor trusts more broadly, if a trust has any of the features described in IRC Sections 671 through 691, it is taxed as if it is owned by the trust’s grantor. The grantor is required to include in their personal income tax computations those items of income, gain, loss, deduction, and credit allocable to the trust. The grantor pays tax on the grantor trust income as if the trust does not exist for income tax purposes.

There’s also an important tax issue to know about. Revenue Ruling 2023-2 clarified that there is no Section 1014 basis adjustment at the grantor’s death for assets held in a completed-gift grantor trust unless those assets are includible in the grantor’s gross estate. This means that if you transfer your business interest to an irrevocable grantor trust as a completed gift, your heirs won’t get a step-up in basis at your death. That has real income tax consequences if they later sell the business. Proper planning can address this, but it requires careful thought about which assets go into which structures. Our Estate Tax Planning in Atlanta Georgia page explains more about how these rules affect your overall plan.

Business Succession Tools: GRATs, IDGTs, and Valuation Discounts

Beyond the basic revocable trust, there are several advanced trust structures that work especially well for closely held business owners. Each one has different tax and planning benefits. Here’s a plain-language look at the most common ones.

A Grantor Retained Annuity Trust (GRAT) lets you transfer business interests to your heirs with minimal gift tax cost. A GRAT may be appropriate for business owners who have a business currently that is likely to appreciate rapidly and would like to maintain control of the business while passing shares to their beneficiaries. You transfer shares to the GRAT, receive annuity payments back for a set term, and at the end of the term, whatever remains in the trust passes to your heirs. So long as the grantor survives the term of the GRAT, the appreciation is removed from his or her estate with a minimum tax cost, limited economic risk, and no loss of control.

An Intentionally Defective Grantor Trust (IDGT) is another powerful tool. By selling appreciating assets to the trust in exchange for a promissory note with a low, fixed rate of interest, the grantor has effectively “frozen” the value of their estate and moved all future appreciation out of the grantor’s estate for tax purposes. When assets such as nonvoting stock of a closely held business are transferred, the asset value may often reflect advantageous discounts for lack of marketability and lack of control.

Valuation discounts are a key planning tool for closely held businesses. Pairing closely held entities with voting and nonvoting classes can support valuation discounts for lack of control and marketability when supported by a qualified appraisal. These discounts can meaningfully reduce the taxable value of a business interest when it’s transferred to a trust or gifted to heirs.

The federal gift tax annual exclusion is $19,000 per recipient in 2026. The One Big Beautiful Bill Act permanently increased the federal estate, gift, and GST exemption to $15,000,000 per individual, indexed for inflation, beginning January 1, 2026. This is good news for business owners who want to transfer interests over time without triggering large gift tax bills. Working with an Atlanta estate planning lawyer who understands both the business side and the tax side of these transactions is essential to getting the best outcome.

Asset Protection for Closely Held Business Owners Through Trust Planning

Owning a business comes with liability. Lawsuits, contract disputes, and creditor claims are real risks for any business owner. Trust planning, when done correctly, can put a wall between your personal assets and those risks. But the structure of the trust matters a great deal.

Under O.C.G.A. §§ 53-12-80 through 53-12-83, Georgia law recognizes spendthrift trusts, which restrict a beneficiary’s ability to transfer their interest and also restrict creditors from reaching it. If you’re setting up a trust for your children or other heirs who will inherit your business interest, a spendthrift provision is a smart addition. It means a creditor of your child can’t simply attach the business interest held in trust.

For the business owner’s own protection during their lifetime, the planning gets more complex. Georgia does not have a domestic asset protection trust statute, so self-settled trusts in Georgia generally do not protect assets from the grantor’s own creditors. However, there are other structures, including family limited partnerships and LLCs, that can be paired with trust planning to add protection. Our Asset Protection Lawyer page covers these options in more detail.

If your business has international ties or you have assets or beneficiaries outside the United States, the planning becomes even more layered. International Estate Planning involves additional tax reporting rules, treaty considerations, and cross-border trust issues that require careful attention. Slowik Estate Planning advises clients on these issues from our Atlanta, Georgia office.

Buy-sell agreements are another critical piece of asset protection for business co-owners. If you co-own your business, a buy-sell agreement can spell out who buys your share, at what price, and how it will be funded, often through life insurance. When a buy-sell agreement is coordinated with a trust plan, you create a clear roadmap for what happens to the business at death or disability. That protects the remaining owners, the business itself, and your family.

FAQs About Closely Held Businesses and Trust Planning in Atlanta, Georgia

Can I put my LLC membership interest into a trust in Georgia?

Yes, you can transfer your LLC membership interest into a trust in Georgia. You’ll need to review your LLC’s operating agreement first, because some agreements restrict transfers or require consent from other members. Once you confirm there are no restrictions, you can assign your membership interest to a revocable living trust or another trust structure that fits your goals. Under O.C.G.A. Title 53, Chapter 12, Georgia law gives trustees broad authority to hold and manage assets like business interests. Doing this correctly keeps your interest out of probate and lets your successor trustee manage or transfer the interest according to your instructions. Slowik Estate Planning, based in Atlanta, Georgia, can review your operating agreement and help you complete the transfer properly.

What happens to my S corporation stock if I die without a trust in Georgia?

If you die without a trust, your S corporation stock will likely go through probate in Georgia. Probate is a public court process that can take months or even years. During that time, the stock sits in your estate, and the estate is generally treated as a permitted S corporation shareholder only for a limited period. If the stock is not transferred to a qualifying shareholder or trust within that window, the company could lose its S election, which would have serious tax consequences. A properly drafted trust that qualifies as an eligible S corporation shareholder, such as a grantor trust during your lifetime or an ESBT or QSST after your death, avoids this problem entirely. Planning ahead with an Atlanta estate planning attorney is the best way to protect your S corporation status.

How does a GRAT work for transferring a closely held business interest?

A Grantor Retained Annuity Trust, or GRAT, is an irrevocable trust you fund with business interests. You receive fixed annuity payments from the trust for a set number of years. At the end of the term, whatever is left in the trust, including all appreciation above a federally set interest rate called the Section 7520 rate, passes to your heirs with little or no gift tax. The strategy works best when your business is expected to grow significantly during the GRAT term. You must survive the trust term for the transfer to be successful. If you die during the term, the assets are generally pulled back into your estate. GRATs require a qualified appraisal of your business interest at the time of funding and careful drafting to meet IRS requirements. Contact Slowik Estate Planning in Atlanta to discuss whether a GRAT fits your situation.

Will my heirs owe capital gains tax if they sell the business they inherited through a trust?

It depends on how the business interest was held and transferred. If the business interest was part of your taxable estate at death, your heirs generally receive a stepped-up basis under IRC Section 1014, meaning the basis is adjusted to the fair market value at the date of your death. That eliminates built-in capital gain for assets that appreciated during your lifetime. However, as confirmed by Revenue Ruling 2023-2, if the business interest was transferred to an irrevocable grantor trust as a completed gift during your lifetime, and the assets are not included in your gross estate, there is no step-up in basis at your death. Your heirs would inherit your original cost basis and could owe capital gains tax on the full appreciation if they sell. This is a critical planning issue that requires careful coordination between your estate plan and your tax strategy. Slowik Estate Planning helps Atlanta clients think through these trade-offs before making irrevocable decisions.

Does Georgia have its own estate tax that affects closely held business owners?

No. Georgia does not impose a state-level estate tax or inheritance tax. Your estate will only be subject to federal estate tax if its value exceeds the federal exemption. As of 2026, the federal estate and gift tax exemption is $15,000,000 per individual, permanently set at that level under the One Big Beautiful Bill Act, indexed for inflation. That means most Georgia business owners will not owe federal estate tax. However, even if your estate is below the exemption threshold, trust planning still matters for avoiding probate, protecting assets, managing income taxes, and ensuring a smooth business transition. Capital gains taxes and income taxes can still significantly affect your heirs, especially if they sell the business after inheriting it. Slowik Estate Planning, located in Atlanta, Georgia, helps business owners plan for all of these issues, not just estate tax.

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