Don’t Use Your Will for Business Succession

A recent article from NJ 101.5, “Should you leave a business in your will?,” asks whether using a will for business succession may have estate tax consequences. That tax might have been substantially reduced or eliminated with good estate planning by parents who want to transfer a business to their children or other relatives.

The federal estate tax exemption is $5.45 million per person this year, plus any state exemption amount. That means if the business is generating some decent revenue, there’s a good possibility that estate taxes could hit after the parents are gone.

Just a third of all family businesses make a successful transition to the second generation because many issues can create obstacles. For instance, the interest of one family member may be different than other family members.

As part of this process, you should identify the successors, the active and non-active roles for each family member, and the additional support from family members needed by the successors.

Small family-owned businesses frequently will transfer shares of the business during the owners’ lifetime to address transfer tax consequences. These transfers can be structured so that the owners will keep control during their lifetime.

Parents, speak with a qualified estate planning attorney to assist with wise succession planning. That way you can decide the most effective way to transfer your business without incurring unnecessary transfer taxes.

Reference: NJ 101.5 (June 15, 2016) “Should you leave a business in your will?

#BusinessSuccession #EstatePlanningLawyer #EstateTax #TaxPlanning