Rosa's Problem: One Child in the Business, Two Who Are Not
Rosa is 68, lives in Kissimmee, and has spent three decades building a landscaping company from a single truck into a business with real crews, real contracts, and real value. One of her three children has worked alongside her for years and expects to run the company. The other two have their own careers and no interest in mowing lawns or bidding jobs. Rosa is a composite client, not a real person, but her situation is one I see constantly in Central Florida family businesses: how do you treat three children fairly when only one of them is actually building the thing you are trying to pass down?
An irrevocable trust is simply a trust the person who creates it cannot unilaterally revoke or change once it is signed, which is exactly what allows it to move business ownership out of Rosa's taxable estate and, done correctly, out of the reach of an unhappy sibling's demand for an immediate buyout. That single feature, permanence, is what makes it useful for succession and also what makes the design work matter so much.
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Book Free Consult or call (888) 388-8445Splitting the Company Into Voting and Non-Voting Units
The starting point for most Florida family business successions is a recapitalization. Rosa's landscaping company, likely organized as an LLC under Florida's Revised LLC Act (F.S. Chapter 605), is restructured so that ownership is divided into two classes: a small class of voting units that controls hiring, contracts, and daily operations, and a larger class of non-voting units that shares in profits and value but has no say in running the business.
- Rosa keeps or transfers the voting units to the child working in the business, so that child has real, unambiguous control.
- The non-voting units can be gifted or sold into an irrevocable trust for the benefit of all three children, or split so the working child's trust holds more and the other two hold proportionate shares of value without any operational authority.
Because non-voting, minority interests are harder to sell and carry no control, appraisers commonly apply valuation discounts for lack of control and lack of marketability when the units are transferred to a trust. Combined discounts in the range professionals typically see run from roughly a quarter to nearly half of the pro rata value, though the correct number always depends on a qualified appraisal of Rosa's specific company, not a rule of thumb. This discounting lets Rosa move more real economic value out of her estate using less of her available gift exemption, but it only works if the trust is drafted and funded correctly and the appraisal will withstand scrutiny.
Equalizing the Two Children Who Are Not in the Business
The hardest part of Rosa's plan is not legal, it is emotional: how do the two children who never worked a single Saturday for the company end up feeling like they were treated fairly, without gutting the business to pay them off? This is where an irrevocable life insurance trust (ILIT) earns its keep.
This is the mechanism that prevents the forced sale. Without life insurance or another source of outside liquidity, families often end up borrowing against the business, selling equipment, or selling the company outright just to write checks to siblings who were never part of day-to-day operations. Rosa's plan avoids that by funding the equalization separately, in cash, through the ILIT.
The Buy-Sell Agreement: The Document That Actually Prevents the Family War
An irrevocable trust and an ILIT solve the estate and gift side of Rosa's plan. But the operational side, what happens if Rosa becomes incapacitated, if the working child wants to buy out a sibling's trust interest later, or if a sibling's marriage ends in divorce and a former spouse suddenly has a claim on trust-held units, is handled by a buy-sell agreement coordinated with the LLC's operating agreement.
A well-drafted buy-sell agreement for a family landscaping company like Rosa's typically addresses:
- Who may buy a departing owner's or trust's interest (the company itself, the working child, or both).
- How the purchase price is determined, usually through a defined appraisal method agreed on in advance so nobody argues about value later.
- How the purchase is funded, often disability or additional life insurance owned by the company.
- Triggering events beyond death: disability, divorce, bankruptcy, or a beneficiary trying to force a sale of non-voting units to an outsider.
Choosing a Trustee Who Can Actually Run a Business Interest
Rosa also has to decide who serves as trustee of the irrevocable trust holding her company units. This is not a ceremonial role. The trustee may need to vote non-voting units on major decisions, enforce the buy-sell agreement, decide whether to make distributions to the non-working children, and mediate disagreements between siblings for years or decades. A trustee unfamiliar with the landscaping business, or one who lacks the judgment to stay neutral between the working child and the others, can undo everything the plan was built to prevent.
Florida's Trust Code, found in F.S. Chapter 736, gives trust creators real flexibility here. Rosa can name a corporate trustee experienced with closely held businesses, a trusted advisor as trustee, or even use a trust protector whose limited job is to oversee the trustee's handling of the business interest specifically. Chapter 736 also allows for changes down the road through mechanisms like nonjudicial settlement agreements, judicial modification, or decanting under F.S. 736.04117, so an irrevocable trust is not necessarily frozen forever if circumstances change and all the right parties agree or a court approves.
What an Irrevocable Trust Cannot Do for Rosa
It is worth being honest about the limits. Florida has no domestic asset protection trust statute, so if Rosa tried to name herself as a beneficiary of her own irrevocable trust to shield the business from her own creditors, that self-settled arrangement generally would not protect those assets from her own creditors. The protection in Rosa's plan runs to her children's interests through spendthrift language, not to Rosa herself. Spendthrift provisions in Florida generally shield a beneficiary's interest from most creditors and from being assigned away, though there are recognized exceptions, and they are not absolute.
It is also worth noting that Florida has no state income tax and no state estate tax, so Rosa's planning here is driven almost entirely by federal gift and estate tax exposure, business continuity, and fairness among her children, not by any Florida-specific death tax.
Frequently Asked Questions
The Truestead Takeaway
Rosa's situation is common, and it is solvable, but it takes more than one document. An irrevocable trust holding recapitalized voting and non-voting units can hand real control to the child running the business while giving the other two a fair, quantifiable stake, an ILIT can supply the cash to equalize them without touching the company's working capital, and a buy-sell agreement coordinated with the LLC's operating agreement can keep future disputes out of court. None of this should be assembled piecemeal. If you own a Florida business and are thinking about how it passes to your children, the sensible next step is a full review of your entity documents, your estate plan, and your family's specific dynamics with a Florida attorney, not a one-size-fits-all trust form.
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Schedule a Consultation →This article is for general informational purposes only and does not constitute legal advice, nor does reading it create an attorney-client relationship. Florida estate, elder, probate, and real estate law are fact-specific and change over time. Consult a licensed Florida attorney about your individual circumstances. Arthur Simpson, Esq. is licensed to practice law in the State of Florida. Attorney advertising.
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