If you own all or part of a business in North Carolina and have a child with a disability, your business documents might be secretly writing your estate plan—and writing it wrong.
Most business operating agreements are drafted standardly, often long before a child is born or diagnosed with special needs. Without proper coordination, standard business buyout terms can accidentally strip your child of vital government benefits at the worst possible time.
Here is how standard buy-sell agreements break special needs estate plans, and how North Carolina business owners can fix them.
When a business co-owner passes away, standard buy-sell agreements in an operating agreement typically require the surviving business partners to buy out the deceased owner’s shares. Default terms direct these buyout proceeds straight to the deceased owner’s estate.
From the estate, those funds pass through a will or state intestacy laws directly to the heirs. If your child with special needs receives an outright share of these business proceeds—whether funded by life insurance or cash reserves—it instantly pushes them over public benefit asset thresholds.
The result? The Supplemental Security Income (SSI) and Medicaid eligibility you worked so hard to establish can evaporate overnight.
Fixing this problem requires making your operating agreement and personal estate plan work together rather than against each other.
Instead of letting business proceeds flow into a general estate, structure your LLC membership interest with a Transfer on Death (TOD) designation directed straight to a revocable trust.
Updating the TOD designation alone isn’t enough. The buy-sell agreement inside the operating agreement must be amended so that your surviving business partners interact and coordinate directly with the trustee of your trust, rather than an estate executor.
Once buyout proceeds flow seamlessly into your trust, the trust terms direct where those assets go. A well-structured plan ensures funds intended for your child with a disability are funneled directly into a dedicated Special Needs Trust, while other assets are distributed appropriately to a spouse, other children, or charities.
Estate planning for a business owner with a special needs child involves moving targets—business valuations shift, asset classes change, and family needs evolve. Trying to craft a “perfect” plan often leads to analysis paralysis, leaving the default, dangerous plan in place.
An intentional, solid plan that is done will always protect your family better than a perfect plan that remains unwritten.
The cost of getting a business estate plan wrong usually surfaces during a time of grief, when your family is mourning and your business partners are under stress.
If you own a business in North Carolina, have a child with special needs, and haven’t reviewed your operating agreement alongside your estate plan in the last five years, it is time for an update. Contact our team today to schedule a consultation and safeguard your business and family.
Call our office at 919-659-8433 or directly schedule a free discovery call at your convenience: calendly.com/caryep/discovery-call-get-started-cep-blog
Paul Yokabitus is the CEO and Managing Partner of Cary Estate Planning, a Cary, NC, estate planning law firm. With years of experience in estate and elder law, he has zealously represented clients in various legal matters, including estate planning, guardianship, Medicaid planning, estate administration, and other cases.
Paul received his Juris Doctor from the Campbell University School of Law and is a North Carolina Bar Association member. He has received numerous accolades for his work, including being named among the “Best Attorney in Cary” in 2016 and 2017 by Cary News and Rising Star in 2020-2023 by Super Lawyers.