The transaction lawyers will tell you that the letter of intent is not binding, and as a matter of contract they are right. As a matter of practice it fixes almost everything that follows — price, structure, and the assumption that the parties selling are the parties who own.
That last assumption is where the money is lost. Planning done before the letter of intent can move a substantial share of the company’s future value out of the taxable estate at a defensible value. The same planning done afterwards moves nothing, because the value is no longer speculative — there is a buyer, a number, and a document saying so.
Twelve to eighteen months is the honest lead time. It is long enough to recapitalise into voting and non-voting interests, to obtain an independent valuation that has not been overtaken by events, to fund a trust and let it season, and to have the difficult conversation about which children will hold interests and which will not.
That conversation is the real work. A sale converts a business the family understood into a portfolio the family must now govern, and the instruments that follow — the trust, the trustee, the distribution standard — will be read by people who were not in the room when they were drafted. Draft them as though they will be.
