ClarityBV Blog

Now is a good time to consider estate-planning transfers. Business values are down, and it appears the estate tax is here to stay. The window of opportunity may be small given the potential for tax law changes.

1. Market values are down across nearly every part of the U.S. economy. For example, see recent articles in the Wall Street Journal and Yahoo! Finance. This provides an opportunity to transfer a larger portion of a privately held business under current gift transfer limits.
2. Applicable Federal Rates are at historic lows. This makes certain trust planning techniques even more attractive. An article in Forbes last December noted that “Lower business valuations and interest rates make business succession right now a no-brainer.”
3. Estate taxes may be here to stay, but some valuation discounts may not be. See the ABA’s Heckerling Reports announcement of the “Pomeroy Bill” HR 436, which would eliminate certain discounts for lack of control and/or lack of marketability for family-owned businesses.

A few caveats…

1. No one knows for sure what will happen with estate taxes and discounts. These types of changes have been proposed before. However, for business owners already considering transfers, this is just one more reason to make them.
2. Although asset values are down, history has shown that further declines are always a possibility. Making these planning transfers assumes a viable business that is not facing a real risk of disappearing altogether.
3. The IRS continues to challenge discounts and pursue appraiser penalties. Compliance with professional standards and clear documentation are vital to building a strong basis for a valuation opinion.