In our last post, we spoke about the importance of reviewing one’s estate plan periodically to ensure it keeps up with current law and continues to serve one’s needs. We named five different events that should prompt the review of one’s estate plan. A recent article in Forbes looks at the matter from the perspective of wellness. The article does mention the importance of reviewing one’s estate plan, particularly for families with family-owned businesses, and notes that now is a particularly good time to do so.
The reason is that big changes are coming in the estate and gift tax regime. At present, business owners can gift up to $5 million to the next generation without paying any gift tax. Next year, that number will drop down to $1 million. To take advantage of the current exclusion amount, it is important to begin the process now. The reason is that the process takes some time to carry out.
The business needs to be appraised, so that the IRS will not have to conduct an audit. There are also discounts available for lack of control or marketability, and these could be thrown out in the near future.
In addition to valuing the business, transfer documents need to be prepared. With respect to transferring stock, the business may need to be recapitalized in order to create voting and non-voting stock, or to place restriction on transferred stock, and so on.
Trusts need to be drafted properly, and this can take time.
Life insurance may also need to be obtained in order to absorb remaining estate taxes, as a substitute for stock for family members not involved in the business, or as a way to diversify family wealth outside the business.
Many attorneys are expecting a busy fourth quarter because of the number of folks hoping to take advantage of estate tax savings. For those who can work these savings into their plan, it is well worth the time and effort.
These and other steps will need to be taken to make g
Source: Forbes, “A Wellness Checkup for Your Estate Plan,” Steve Parrish, August 7, 2012