By James G. Burns, Esq. | Updated October 13, 2026

A family can inherit valuable property and still inherit a problem. Three children may receive equal interests in a business while only one works there. A trustee may control the real estate while a different person controls the cash. The documents can look orderly while the decisions remain unresolved.

Preserving family wealth requires an operating plan for ownership, authority, liquidity, and succession. A trust has to fit the assets and the people who will administer it.

Start with the failure the plan must prevent

The familiar claim that 90% of family fortunes disappear by the third generation should not be treated as a verified prediction about your family. Definitions of wealth, failure, and generation matter. We do not need a dramatic percentage to identify a concrete exposure.

Consider this hypothetical: three siblings inherit commercial property with a loan, deferred repairs, and limited cash. One needs a distribution, one wants to hold the property, and one wants to refinance. Equal percentages do not answer who decides, how an exit is valued, or where the money comes from.

That is where planning earns its value. Identify the foreseeable disagreement, then build a mechanism that can address it.

Seven decisions that make the plan operational

1. Match the asset to the person who can act

For each property, account, and business interest, record the current owner and the person authorized to act during incapacity and after death. Read the deed, account registration, trust, beneficiary form, and entity agreement together.

A successor trustee's authority over trust property does not automatically make that person the manager of an LLC. A financial agent's authority does not automatically include every trust amendment, gift, or ownership change. Each proposed action requires its own authority review.

The first deliverable should be an accurate map of ownership and control. Our seven-question California estate-planning risk map explains how that diagnosis connects to the rest of the plan.

2. Give family governance a legal mechanism

Write down how the family expects decisions to be made: who votes, who manages, which decisions require additional consent, how distributions are considered, and what happens when someone wants out.

A family mission statement can explain values. The trust and operating agreements must supply the enforceable powers, duties, and procedures. Counsel should reconcile the documents so that a buyout provision does not conflict with a trust restriction or a lender's requirements.

Choose trustees and managers for the work they will perform. The oldest child may be a suitable beneficiary without being the best person to manage an operating business or administer a disputed trust.

3. Fund equalization and exits before promising them

An estate can be valuable and short of cash. Review debt service, administration costs, taxes, repairs, surviving-family expenses, and any promised buyout or equalization payment.

In the commercial-property example, a right to purchase a sibling's interest needs a valuation method, payment terms, and a realistic funding source. A mandatory cash buyout can force a sale if the estate has no available cash.

Reserves, insurance, installment terms, or borrowing may belong in the analysis. Each has costs and limits. A credit line can be unavailable precisely when collateral values fall. Model an unfavorable market as well as a favorable one.

4. Coordinate transfer taxes with income tax and basis

The IRS identifies a $15 million federal basic exclusion for 2026. Prior taxable gifts and other facts affect the remaining amount. A large exclusion does not resolve fiduciary authority, family conflict, creditor exposure, or a cash shortage.

For eligible spouses, portability can preserve a deceased spouse's unused estate-tax exclusion through the required election. It is not automatic simply because the couple signed a joint trust. The Form 706 instructions explain the filing requirements and available relief.

Generation-skipping transfer tax needs a separate review. The IRS expressly distinguishes GST exemption from portability: a portability election does not transfer unused GST exemption to the surviving spouse.

A dynasty trust may support long-term administration and transfer-tax planning, but it is not automatically free of income tax. The Form 1041 instructions distinguish grantor-trust reporting from taxation of other trusts. Review estate inclusion, gift treatment, basis, distributions, and state taxation as separate questions.

5. Keep business risks separate from family decisions

Examine leases, loans, personal guarantees, insurance, transfer restrictions, and the business's actual records. Moving a business interest into a trust does not by itself release the founder from a guarantee.

An LLC also does not erase personal liability or make every interest unreachable. Our guide to California LLC charging orders and their limits addresses the creditor side of that analysis. The succession plan should account for those exposures rather than assume the entity name supplies complete protection.

Use separate accounts and records, keep insurance current, and coordinate the entity's agreement with the trust. Our asset-protection practice examines those liability questions within the family's broader ownership structure.

6. Make digital succession lawful and usable

Identify important online accounts, business domains, cloud records, exchange accounts, and self-custodied digital assets. Then distinguish legal permission from the practical ability to recover access.

California's digital-asset law recognizes user directions through qualifying online tools. As reflected in the enacted text of AB 691, including Probate Code section 873, a qualifying tool's disclosure direction can override a contrary direction in a will, trust, or power of attorney. Provider settings and estate documents therefore need to agree.

Keep passwords, private keys, and seed phrases out of ordinary trust documents and broadly circulated inventories. Use secure recovery arrangements that the authorized successor understands. Owning cryptocurrency and having permission to seek account information are not the same as possessing a usable recovery key.

7. Prepare successors for responsibility

Beneficiaries need to understand the assets, the distribution standards, and the reasons behind the structure. Trustees need to understand recordkeeping, conflicts, fiduciary duties, and when to obtain advice.

Use age-appropriate education, sample financial statements, and discussions about decisions the next generation may face. Document who will provide training and who can assist when the founder is unavailable. The plan should remain usable by people who were not present when it was drafted.

Pressure-test the plan before the triggering event

Ask the advisers to walk through three situations: the founder becomes incapacitated, one heir wants an immediate exit, and the principal asset cannot be sold at the expected price. Record who acts, which document grants authority, what cash is available, and which approvals or deadlines apply.

• Can the successor locate the current documents and asset records?
• Do deeds, account registrations, and beneficiary forms support the intended distribution?
• Can trustees and business managers act without conflicting instructions?
• Are buyouts and equalization payments financially achievable?
• Have tax elections and reporting duties been assigned to a responsible adviser?
• Does each successor know whom to contact when a decision exceeds their experience?

These answers guide the drafting. Risk Exposure Mapping comes first; documents, ownership changes, funding, and implementation follow the facts. Our estate-planning services are built around that coordination.

Request a Situation Readiness Briefing

Request a Situation Readiness Briefing to identify the ownership, authority, liquidity, and succession questions your family needs to resolve before choosing or revising its legal structure.

Disclaimer

This article provides general educational information and is attorney advertising. It is not legal, tax, investment, accounting, or financial advice and does not create an attorney-client relationship. Laws and individual circumstances change. Hypothetical examples illustrate planning questions and do not describe client results. Obtain individualized advice before implementing a strategy; no outcome is guaranteed.

IP Disclosure

Original text and framework language are proprietary materials of the Law Office of James Burns. The firm's name, marks, and service descriptions are used to identify its services. External authorities, publications, agency names, and third-party marks belong to their respective owners. Links are provided for reference and do not imply endorsement.