By Jeffrey A. Galant
Succession planning in the context of family-owned or controlled businesses generally has two overarching concerns: first, who will manage the business, and second, how will ownership and control be shared among the family members? As a preliminary matter, family leaders need to decide whether the mission of their business is solely to maximize profits and value for the family’s benefit or is it broader: to not only provide financial security for the family but also to support the various stakeholders such as the customers and employees of the business, as well as local charities and business associations.
Current Events
A quick look at recent headline stories of business families in the throes of succession-driven matters is most instructive. For instance, there is the family of the Japanese entrepreneur Junro Ito and its interest in the worldwide business of the 7-Eleven convenience stores. Also, there is the Rupert Murdoch family and its ownership and control of Murdoch’s media empire, including Fox News, The Wall Street Journal and the New York Post.
7- Eleven
In Mr. Ito’s situation, he is trying to thwart a $47 billion takeover attempt by the Canadian group, Alimentation Couche-Tard, owner of the Circle K convenience stores. Mr. Ito has countered with a $50 billion leveraged buyout offer. Bottom line, Mr. Ito is seeking to both retain and enhance his family’s ownership interest by gaining control of 7-Eleven. An avid follower of the late management guru Peter Drucker, Mr. Ito champions relationships with customers and communities. See, e.g., River Akira Davis, A 7-Eleven Heir’s $50 Billion Fight to Keep the Company in the Family, The New York Times, December 24, 2024.
Murdoch
An almost ideal case study is the ongoing saga of the Murdoch family’s succession battles. Although the family keeps a tight lid on succession matters, due to a recent flare-up in a Nevada probate court, it has been revealed that the family’s irrevocable trust that holds the media empire will, upon Rupert Murdoch’s death, pass equal voting rights to each of his four older children. Although all six of his children share equally in the equity of the media empire, apparently, the equity interests held for the benefit of Mr. Murdoch’s two younger children are nonvoting.
Mr. Murdoch is reportedly concerned that after his death, his eldest son and chosen successor, Lachlan, without having voting control, would be seriously impeded in his ability to manage the media business and maintain the current conservative-leaning editorial approach. Therefore, Mr. Murdoch had attempted to amend the irrevocable trust to provide Lachlan with voting control. The probate commissioner reportedly rejected the attempt as not in the best interests of all the children. Mr. Murdoch has reportedly appealed the probate commissioner’s decision. For an exhaustive analysis of the family’s succession drama, see Mahler, Jonathan, and Rutenberg, Jim, The Murdoch Family Plot, The New York Times Magazine, p. 26, February 23, 2025. See also, Cahn, Naomi, https://www.law.virginia.edu/news/202412/professor-explains-legal-background-behind-murdoch-trust-dispute
Among the various thoughts and reactions one can have about the unfolding melodrama, it would seem certain that in hindsight, Mr. Murdoch likely rues the day when he agreed to the trust’s terms that have restricted his ability to continue to manage the succession process. For additional insight into the family intrigue see McKay Coppins, Growing Up Murdoch, The Atlantic, April 2025.
Management Succession
It is axiomatic that without effective management, an operating business will not prosper. Generally, it is in the interest of each family member, irrespective of whether employed by the business, to have the best person available in terms of skill and experience managing the business, regardless of whether such a person is a family member. Planning for the future leaders of the business is of primary importance. In some enlightened families, family members are encouraged at an early age to get involved in the business. Additionally, younger family members may be expected to attend college and possibly graduate school, as well as to seek actual work experience in unrelated businesses or government service. It is certainly best practice to have a plan in place to deal with management succession, and consulting and exploring options with management experts in this regard makes sense.
Ownership Succession
Generally, as businesses grow and mature, it is not unusual for there to be a separation of management and ownership. However, although it may be in the family’s interest to have professional managers operating the business, the family’s desire may be to continue its ownership and control. In any such case, it will be important to have a plan in place that deals with ownership succession. In this regard, passing down ownership to succeeding generations with the intent to maintain and safeguard such ownership within the family can be quite complex due not only to the family dynamics involved, but also to the ever-changing tax laws and the various relevant legal aspects. In connection with such legal aspects, close attention should be paid to the laws governing inheritance, trusts and estates as well as the relevant corporate governance issues and on a practical level, the various applicable Will provisions, trust agreements, shareholder agreements, limited liability company operating agreements, partnership agreements, employment agreements, lease agreements and prenuptial agreements.
The big picture is that the current owner or owners of the business may want to treat the next generation equitably if not exactly equally. For example, and as may be playing out in the Murdoch family, descendants who work in the business may be given more control over the business than their siblings and/or cousins who do not work in the business, while keeping in mind the desire that the equity in the business be shared by all on a more equal basis. These of course, involve decisions that each business-owning family must make for themselves as influenced by their own mission and purpose. Note that in some cases, only family members who work in the business may be entitled to ownership.
Estate Planning for Business Families
Assuming that the issues of leadership and control have been resolved, the next phase of the succession process is to assure to the extent practical, (i) the noninterference of creditors or other third parties with the assets and operations of the business, and (ii) the minimization of gift, estate and generation skipping taxes as the ownership of the business is passed down to the succeeding generations.
There is obviously no “one size fits all” approach that is applicable here. Using trusts, corporate and limited liability company entities, and prenuptial agreements, the ownership of family businesses can be preserved for family members and protected from outsiders.
Trusts are particularly useful for tax minimization while keeping the business in the family. In 2025, the federal gift and estate tax exemption is $13,990,000 or $27,980,000 for a married couple. The exemption may be leveraged in a variety of ways, such as freezing the value of the older generation’s interest in the business through, e.g., so-called “preferred partnerships”, and taking advantage of available discounts, including lack of marketability and lack of control discounts when making gifts in trust of minority interests in the business. This can include gifting to a so-called “grantor retained annuity trust” (GRAT) or “selling” to a so-called “grantor trust” to make room for other gifts or once the exemptions have been fully utilized.
Unless extended by new legislation, at the close of 2025, the exemption will be halved to approximately $7 million or $14 million for a married couple. Planning to take advantage of the full exemption may be worthwhile, recognizing that it is not yet clear whether there will be an extension.
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Jeffrey A. Galant is counsel to Meltzer, Lippe, Goldstein & Breitstone’s business & real estate taxation, trusts and estates, tax exempt organizations and private wealth and taxation practice groups.