On behalf of Bebout, Potere, Cox & Bennion, P.C. posted in estate planning on Monday, February 13, 2017.
Many people who have heard about the estate tax, also known as the death tax, are worried about how to protect their assets. As estate taxes could wind up compromising up to 50 percent of the value of people’s estates if left unchecked, it is critically important to seek estate planning guidance from an experienced attorney if your estate is significant enough to be affected by this tax after you have passed away.
While most people think about their assets when it comes to the value of their home, cars, and investment portfolios, people who run their own business have an entirely separate issue to worry about when it comes to the estate tax. Without careful planning in the years leading up to the owner’s death, the family-owned business could fall victim to the estate tax as well.
The American Dream?
People who think about the “American Dream” often think about a family working hard to build up a small business that is used to support themselves and their children while providing for their community. This version of the American dream is alive and well as reflected by the number of people who either run their own business or who are employed by one of these businesses.
Many of these businesses are passed down from generation to generation; however, the businesses often take a large hit as they are passed down through the generations thanks to the estate tax. Anyone running their own business should think about how their business will be passed down as soon as they open.
What are the Goals of the Business?
The first step is deciding whether or not the person who just opened their business desires to keep their business in the family or sell it when they retire. If they do desire to keep it in the family, they need to decide whether or not they are going to sell the business to their heirs or simply perform a transfer of ownership.
A third option that isn’t often considered is to give the intended heirs the choice as to whether or not to sell the business once it reaches their hands. Some children do not have the skills or desire to maneuver a family business and might desire to take this route instead.
Careful Planning is the Answer
Clearly, there are numerous options on the table and each has their pros and cons. This is where an experienced business or estate planning attorney can help. They can work with the current business owners and the intended heirs to make sure that everyone is on the same page regarding what to do with the business. Then, they can decide how best to position the business in the estate plan to make those goals happen.
Along the way, the estate planning attorney is going to ensure that the business is valued properly, that all documentation is in order, and that all potential tax issues are taken care of. Anyone with a family-owned business may benefit from contacting an experienced estate planning attorney for assistance in regards to this critical matter.