Roughly 52 percent of U.S. business owners are now 55 or older, and McKinsey projects about six million American small and midsize businesses will change hands by 2035. Yet a 2026 survey found only 42 percent of owners have a succession plan in place, and only about a third have anything documented as a formal exit plan.
The gap matters most for the transition nobody schedules: a death, a disability, a divorce, or a partner who wants out at the worst possible time. On that day, one document decides who owns your shares, what your family is paid, and whether the company survives the handoff.
Two Changes Rewrote the Rules
In Connelly v. United States (2024), the Supreme Court held unanimously that company-owned life insurance used to redeem a deceased owner’s shares increases the value of the business for federal estate tax purposes — which means the entity-purchase structure most closely held companies use may no longer be the right one. And the One Big Beautiful Bill Act permanently set the federal estate and gift tax exemption at $15 million per person beginning in 2026, which can badly distort older documents containing formula language tied to “the exemption amount.” If your agreement was drafted before mid-2024, it was written for a different legal and tax environment.
Where the Money Comes From
An agreement that says what should happen is only half a plan. The other half is liquidity — the cash to execute it on the day it is triggered. Cash reserves drain working capital at a fragile moment. Lenders are cautious after a business loses a key owner. Installment payments tie the family’s security to future performance. Life insurance funding delivers money at the exact moment of the trigger — but who owns the policy, who pays the premium, who is the beneficiary, and how the agreement is worded all drive the tax outcome. Two companies with identical coverage can end up in materially different places based solely on structure.
The Valuation Nobody Updated
The most common failure is not a missing agreement — it is a stale one. A price set in 2015, or a formula tied to a multiple the industry no longer uses, produces a number disconnected from what the company is worth today. Coverage drifts the same way: a $2 million policy written against a $2 million valuation is inadequate against an $8 million company. Valuation and coverage should be reviewed together, on a defined schedule.
Who Owns the Coordination?
This is precisely the work that falls between advisors. The attorney drafts, the CPA models the tax, the insurance professional funds it — and too often no one owns the coordination. Serving as the strategic quarterback across those three conversations is what we mean by the entrepreneur’s family office: one team making sure the agreement, the funding, and the estate plan still agree with each other, year after year.
Read the full guide for what Connelly changed, how the 2026 exemption affects older documents, how to fund a buy-sell, and a six-step review sequence. Download the September 2026 Prospera Perspectives PDF →
This content is for educational purposes only and does not constitute legal, tax, or investment advice, nor a recommendation to purchase any product. Buy-sell, estate, and business succession planning involve legal and tax matters that must be addressed with your own attorney and CPA based on your specific facts. Tax law, including the federal estate and gift tax exemption, is subject to change, and state estate or inheritance taxes may apply at lower thresholds. Case law referenced is summarized for general educational purposes only. Outcomes vary based on entity type, agreement language, ownership and beneficiary structure, valuation methodology, and the age and health of the insured at underwriting. Life insurance policy guarantees are subject to the claims-paying ability of the issuing insurance company; coverage is subject to underwriting approval. Any figures shown are illustrative. Review complete policy illustrations and your governing documents with licensed professionals before making a decision.