National Estate Planning Awareness Week: Are You a Business Owner?

In 2008, Congress passed House Resolution 1499 which designated the third week in October as National Estate Planning Awareness Week. Now, before...

In 2008, Congress passed House Resolution 1499 which designated the third week in October as National Estate Planning Awareness Week. Now, before we go any further, let us assure you that even though you may instantly feel a yawn coming on when the topic of “Estate Planning” is brought up, this is not the same thing as National Sleep Awareness Week (that was in March). However, such a reaction indicates why further public awareness of the subject is needed.

The Congressional finding that “careful planning can greatly assist Americans in preserving assets built over a lifetime for the benefit of family, heirs, or charities” is especially true for small or family-owned businesses. For business owners, proper planning can prevent the entire value of your business from being taxed upon your death, can give you greater control over what happens to your business, and can help you provide those you love most with the foundation and stability to carry on after you are gone.

Under current law, estate tax is levied at 40% of the value of an estate in excess of $5.43 million. Thus, if an estate includes an interest in a private business, up to 40% of the value of that interest might be due in estate tax within nine months of the business owner’s death. Absent sufficient liquidity in the estate, it may be necessary for the estate to sell its business interests – potentially in a “fire sale” mode – to raise the funds to pay the estate tax. Proper estate planning can positively affect both the amount and timing of the tax bite and preserve the business for successors.

However, for business owners, proper planning goes beyond planning for future estate tax considerations.



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