Advanced forms of wealth transfer and estate planning are more complicated, and consequently more expensive to implement. However, their costs and complexity are almost always dwarfed by the tax savings, and capital preservation, they achieve. On January 1, 2011, the estate tax exemption increased to $5,000,000, meaning that a married couple can now pass $10,000,000 to their heirs estate-tax free by the simple expedient of establishing a fully tax-planned living trust. Coupled with the probate-avoidance features of a living trust, everyone should have a living trust where an estate of any substantial size is involved.
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On January 1, 2011, the estate tax exemption increased to $5,000,000, meaning that a married couple can now pass $10,000,000 to their heirs estate-tax free by the simple expedient of establishing a fully tax-planned living trust. Coupled with the probate-avoidance features of a living trust, everyone should have a living trust where an estate of any substantial size is involved.
Buy-Sell Agreement Will Help Prevent Business Disagreements || Unless you are the type who looks forward to going into business with your ex-partner’s spouse, most small and mid-size business owners need a written buy-sell agreement to prevent future problems. No matter how small the business, when there are multiple business owners, it’s smart to have a binding buy-sell agreement which applies to everyone in the event of the death or disability of an owner, or disagreement among the co-owners.
Family Limited Partnerships Create Big Tax Benefits for Family Business Owners || Family limited partnerships are emerging as a favorite tax advantaged vehicle for transferring family businesses or real estate to the owners’ sons and daughters. If properly created, funded and operated, family limited partnerships can be used to achieve considerable income, estate and gift tax benefits.
Selecting a successor is much more difficult for most entrepreneurs than choosing a spouse because they hate to think about ever leaving the company they started. It’s just like going to the dentist for most business owners. The last thing that any entrepreneur wants to admit is that he or she is replaceable. After all, these owners started the business from scratch, struggled through the tough early years and usually have spent more time keeping the business above water than they have with their families.
The following article was published in three parts in California Business Law Practitioner, in the Fall 2008, Winter 2009, and Spring 2009 issues, published by the California Continuing Education of the Bar (“CEB”). Elements of the article were subsequently included in the two volume treatise “Business Succession Planning,” also published by CEB, which provides in depth and expanded coverage of the subjects addressed below. Although the article was written for an audience of business lawyers, non-lawyers with backgrounds in business and finance should have no difficulty in understanding the concepts and methods described
The typical business owner’s goal is to exit his or her business with the most wealth on the most favorable tax terms. However, this requires a coordinated team effort. The ideal succession planning team includes an experienced professional cadre of attorney, accountant, financial planner and life insurance agent, as well as the business owner and his or her heirs. Each of the team members has an important role to play.
To Cut Estate Taxes Later Start Giving Your Business to Your Beneficiaries Now || Smart business owners can use the $10,000 annual gift tax exclusion as a highly effective way to pass along substantial blocks of equity in their businesses to their heirs and beneficiaries with no estate or gift tax at all. As is true in almost every tax planning area, the sooner you start to do this, the greater the results that can be obtained. This is an excellent tax-saving concept, especially if it is used early and often during the formative years of a business’ development.
Turn on the Heir Conditioning for Family Business Survival || For an orderly transition to succeed in a typical family business, you, as the business owner, should begin an immediate program of heir conditioning — involving your heirs in succession planning.
What You Don’t Know About Your Business' Value Can Be Costly || In some cases, ignorance is bliss. However, when a business owner doesn’t know the true value of his or her business, there is little bliss involved. Many business owners have no idea of the current market value of their business, which usually is the lion’s share of their net worth. This can be a costly mistake when the time comes for them to reduce their day-to-day involvement in the business.