It’s a common scenario in family-owned businesses. Two of the owner’s children inherit the company and, while one is eager to sell, the other wants to keep the business in the family. Unfortunately, such conflicts can erupt into open combat between heirs and even destroy the company. So it’s important for family business owners to make a succession plan — and to communicate it well before...
If you’ve made substantial gifts to your loved ones, or if you’re the executor of someone’s estate, it’s important to understand the rules surrounding gift and estate tax returns. Determining whether you need to file a return can be confusing, and in some cases it’s advisable to file a return even if it’s not required. Here’s a brief summary of the rules. Gift taxes Generally, a...
Did you know you can provide for your companion animals in your revocable living trust? The courts have held in prior decisions that an outright gift to an animal is void. In Estate of Russell (1968) 69 C2d 200, the court found that a dog, Roxy Russell, could not be a beneficiary of a will under the current law, which limited disposition of property to any “person." A "person" was defined to...
Family businesses rarely last after the second generation. So, if you want your business to continue to thrive — even after you’ve retired — you need to develop a succession plan for the future. One important step in the succession planning process is determining the best way to transfer ownership interests to the next generation. All in the family — or not The first thing many business...
Trusts typically are a main component of an estate plan. But do you know how higher taxes can impact a trust’s overall effectiveness? Because the income thresholds for trusts are low, it’s worth your time to understand how the current tax environment affects your trust planning. 2016 rates For 2016, the top marginal individual income tax rate is 39.6%. And the capital gains rate for taxpayers...
Owners of family businesses face unique challenges that nonfamily-business owners don’t have to worry about. These often arise from the dynamics of family relationships and the need to transfer these into the business environment. Family relations can sometimes get messy. When family members go to work together, it can be hard to flip a switch and pretend that problems at home don’t exist....
Employee stock ownership plans (ESOPs) offer closely held business owners an exit strategy and a tax-efficient technique for sharing equity with employees. But did you know that an ESOP can be a powerful estate and retirement planning tool? ESOPs can help business owners address several planning challenges, including lack of liquidity and the need to provide for children outside the business....
With the federal gift and estate tax exemption at an inflation-adjusted $5.45 million in 2016, many people are shifting their estate planning focus to income tax reduction. One potentially attractive strategy for high-income taxpayers, particularly those who live in high-income-tax states, such as California, is an incomplete nongrantor trust. These trusts — established in favorable tax...
Affluent families who wish to make large lifetime gifts should consider using defined-value clauses or other formula clauses to minimize or eliminate gift taxes. These clauses are especially effective when transferring assets that are difficult to value, such as closely held business interests or real estate. By defining the gift according to the amount of value you wish to transfer — rather...
If a substantial portion of your wealth is tied up in a family or closely held business, you may be concerned that your estate will lack sufficient liquid assets to pay estate taxes. If that’s the case, your heirs may be forced to borrow funds or, in a worst-case scenario, sell the business in order to pay the tax. For many business owners, Internal Revenue Code Section 6166 provides welcome...
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