As a business owner, you’ve worked hard to build your wealth. When it’s time to plan for the future, one question many of my clients ask is: “Can I charge my estate planning fees to my business?”
It’s a smart question. After all, why not have your business cover these costs if possible? The answer isn’t black and white. It depends on what services you’re paying for.
When Your Business Can Foot the Bill
Some aspects of estate planning directly benefit your business, making them potentially deductible. For example:
- Business Succession Planning: If you’re mapping out who takes the reins after you step away, that’s protecting your business. Planning leadership transitions or creating buy-sell agreements directly benefits your company’s future.
- Business Tax Strategies: Working with professionals to minimize your business’ tax burden? Those fees often qualify as legitimate business expenses.
- Entity Structuring: Setting up LLCs, S-Corps, or partnerships to manage your business more effectively is generally considered a business expense.
When Estate Planning Stays Personal
On the flip side, many estate planning elements are purely personal and can’t be charged to your business:
- Creating a Will: Your will primarily benefits your family and heirs, not your business. The IRS views these costs as personal.
- Personal Trusts: If your trust mainly handles your personal wealth rather than business assets, those fees stay in the personal column.
- General Asset Distribution: Planning who gets what after you’re gone is personal financial planning, not a business expense.
What the IRS Looks For
The IRS allows deductions for expenses that are “ordinary and necessary” for your business. The key question they’ll ask: Does this expense help the business operate or grow?
If an expense serves both business and personal purposes (which estate planning often does), you can only deduct the business portion. You’ll need documentation to back up your claims if questions arise.
Smart Moves for Business Owners
Here’s what I recommend to my clients:
- Ask for Detailed Invoices: Request that your attorney separate business and personal services on different invoices. This creates a clean paper trail.
- Talk to Your CPA First: Before assuming anything is deductible, run it by your tax professional. They know your specific situation and can guide you appropriately.
- Keep Excellent Records: Document how/why certain planning elements were necessary for your business. If the IRS comes knocking, you’ll be prepared.
The Bottom Line
Estate planning exists at the intersection of your personal and business lives. When the work directly benefits your company, such as planning for ownership transitions or reducing business tax burdens, you might be able to deduct it as a business expense. When it’s about your personal legacy and family wealth, it’s a personal cost.
The small effort of sorting these expenses correctly now can prevent headaches later and might even save you money. As with most financial decisions, a quick conversation with your tax advisor before making assumptions is always time well spent.