Gift Tax Exemptions Create Succession Opportunity for Business Owners

Posted almost 4 years ago. 1 helpful vote



A Possible Golden Opportunity

This means that you can give away that much wealth without paying a cent in gift taxes. It can really be a golden opportunity to transfer wealth to the next generation at no tax cost. However, this transfer of ownership can also bring about complex succession and estate planning issues that business owners should address before giving away a cent. If you are a business owner and want to take advantage of this two-year rise in the gift tax exemption, here are questions you might ask yourself: o Who will eventually lead the business? o How can I treat my other heirs fairly? o How do I pass down wealth without jeopardizing my own retirement security?


Start Planning Now

These are complicated questions. The answers will decide which estate planning strategies make the most sense for you and your family. In our experience, such decisions typically can't be made in a matter of weeks or months. We recommend that, if you want to take advantage of the new gift tax exemptions, you should start planning now. The main advantage of your transferring a stake in your family business now is that your heirs won't have to take on debt or sell the business to satisfy the estate tax bill incurred upon your death.


Give It Away, but Keep Control

Depending on your situation and objectives, the transfer can be structured so that you keep managing control for life, or for a set period. To ensure that retirement plans remain secure, the transfer can stipulate that you retain a salaried position (employee, consultant or chairman) and have a profit-sharing or defined-benefit pension plan. Also, you should earmark assets outside the company to accommodate beneficiaries who are not on the company payroll and achieve equity in distributing your assets. That way, the child who eventually takes over the business can manage it without having to consult with siblings, some of whom may insist upon large distributions.

Additional Resources

Hoopes, Adams & Alexander, PLC, is a Chandler, Arizona, law firm offering services to Phoenix-area clients in the areas of estate planning, entity formation, commercial and real estate transactions, and civil litigation.

Hoopes, Adams & Alexander, PLC

Rate this guide

Related Topics


There are different types of debt, but all involve one person (the debtor) owing money to another (the creditor). Terms of repayment are governed by a contract.

Estate tax

The estate tax is a tax on property transferred from a deceased person's estate. It only applies to any value of the estate over a certain limit set by law.

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.


Ask now

28,665 answers this week

3,540 attorneys answering