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Anita Mahamed is a CPA, CFP and partner at Wipfli, a Milwaukee-based accounting and consulting firm that works with construction companies. He leads Wipfli’s construction and real estate practice in southern Wisconsin. The opinions are the author’s own.
While the next Republican-controlled Congress and presidency may extend current tax breaks, construction company owners aren’t taking any chances with their succession planning. At stake is a potential reduction in the lifetime estate and gift tax exemption from nearly $14 million per person to roughly $7 million in 2026, a change that could dramatically affect how homeowners of construction companies transfer wealth to the next generation.
Under current law, the lifetime estate and gift tax exemption through 2025 allows married couples to transfer nearly $28 million without federal estate or gift implications. While policy changes may extend these benefits, industry experts advise that waiting for certainty could mean missing out on crucial planning opportunities, especially given the complex nature of construction business succession.
Here are some steps construction professionals can take now:
Embrace employee ownership

Anita Mahamed
Permission granted by Wipfli
Employee stock ownership plans are an especially powerful tool for construction business owners looking to make this transition. These plans offer unique advantages in an industry where finding willing buyers with sufficient liquidity can be difficult.
Unlike traditional buyers who typically prefer asset purchases to maximize capitalization deductions, ESOPs facilitate stock transactions that generally result in more favorable capital gains tax treatment for sellers.
The flexibility of ESOP structures allows owners to sell part or all of their business, using a variety of financing methods, including excess company cash, seller financing, or lender financing. This adaptability is especially valuable for construction business owners who want to maintain some control as they begin their transition process.
Through seller financing arrangements, owners can spread their capital gains over time as they collect ticket payments, creating additional savings through the time value of money, which is particularly advantageous in today’s environment of ‘high interest rates.
Beyond immediate tax considerations, ESOPs can enhance estate planning through creative structuring. Sellers can transfer remaining shares to future generations outside of the ESOP.
And because an ESOP transaction adds debt to the company’s balance sheet, it often results in a lower price for the company’s equity and stock. This reduction allows owners to gift shares to future generations using less of the lifetime exclusion, which can maximize the benefit of the current high levels of exemption before any potential changes in 2026.
Building organizations ready for the future
The benefits of ESOPs go far beyond tax efficiency, addressing some of construction’s most persistent challenges. According to the World Economic Forum, by 2025, machines will perform more current work tasks than humans, compared to 71% performed by humans today.
This technological change makes employee ownership particularly valuable, as employee owners tend to be more receptive to adopting new technologies when they understand how these investments benefit the long-term success of the company, and therefore both, his own.
The inherently collaborative nature of the industry uniquely positions companies for employee ownership transitions. This existing culture of teamwork and hands-on participation is a great foundation for ESOP success.
Integrating philanthropic goals can further enhance succession planning through ESOPs, as selling to an ESOP provides estate liquidity that can fulfill charitable goals while creating additional tax advantages—the amounts that pass to organizations benefits from an estate are not subject to estate tax.
Overcoming resistance to change
As construction companies face increasing pressure to modernize their operations, ESOPs offer unique advantages beyond tax and estate benefits. The ownership structure inherently supports the industry’s evolving needs for better technology adoption and talent retention.
Traditional construction companies often struggle with implementing new systems and processes due to short-term pressures and resistance to change. However, companies owned by ESOPs often find it easier to invest in long-term infrastructure improvements because their ownership structure naturally aligns with longer investment horizons. This becomes especially important as companies face cybersecurity issues and the need for improved data visibility.
The employee ownership model also helps address the industry’s persistent talent challenges. While many construction companies struggle with succession planning and leadership development, ESOP structures create natural pathways for emerging leaders.
Employee owners are more likely to embrace career development opportunities and take on more responsibility when they have a direct stake in the company’s success.
looking ahead
Potential legislative changes may extend current exemption levels, but succession planning is complex, so businesses need to prepare immediately. Owners should work closely with their CPAs and attorneys to identify tax-efficient wealth transfer strategies that align with their specific circumstances and goals. To help ensure long-term success, this planning should take into account current tax implications and operational considerations.
Key considerations for contractors considering ESOPs:
- Evaluate the company structure, as only C and S corporations can take advantage of ESOP benefits; partnerships and individual owners should restructure first.
- Consider redeeming the notes in installments to spread the capital gains over time, which is especially advantageous in today’s high-interest environment.
- Explore the IRC Section 1042 election to defer gains by rolling the income into qualified replacement property.
- Review philanthropic goals, as ESOP transactions can provide estate liquidity for charitable giving that is not subject to estate tax.
- Assess technology infrastructure and cybersecurity measures, as employee-owned businesses need robust systems to support distributed ownership.
- Initiate discussions with third-party administrators who can handle ongoing ESOP regulatory accounting and filing requirements.
For construction business owners considering succession options, the early months of 2025 will be an important time for implementation. The combination of high exemption levels, flexible ESOP structures and the industry’s strong collaborative culture creates an opportunity for thoughtful transition planning that benefits owners, employees and the company’s legacy.
Rather than thinking about whether to adapt to potential new policy changes, construction companies should think about how quickly they can build the infrastructure needed to take advantage of these tax benefits while they last.