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Critical Steps in a Business Estate Check-up


September 5, 2012
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The most common estate planning mistakes business owners make are failing to review their current strategies and taking tax law changes into account. Adopting a “set it and forget it” attitude can result in a higher tax burden and confusion among beneficiaries and heirs, both of which can endanger small companies. Frequent reviews of business estate plans can help mitigate these oversights, and there are several steps owners can employ to ensure they have covered all the necessary components of an estate. First and foremost, it’s crucial that owners have their businesses professionally valued. Low valuations are a common mistake the Internal Revenue Service examines, and this can lead to significantly higher tax bills for a company and its new heirs, according to Forbes. Owners who want to take advantage of tax benefits and ensure their company stays in the proper hands may also consider an irrevocable trust to help them accomplish their goals. These types of trusts may allow for more flexibility regarding how a company is managed and the types of spending beneficiaries may engage in, the news source explains. Gifting property and business interests prior to 2013, when lifetime limits are expected to increase, may also help an owner limit the size of the taxable estate. Many family-owned businesses begin integrating heirs into the company well in advance to ensure a smooth transition. However, it’s equally important to draft a document outlining a company’s assets and debts as a way to guide new heirs on how to manage a company’s capital, according to The Business Times. This may include property ownership and values, company stock holdings and investments, insurance policies, debts, and other relevant financial data that may impact a company’s value, tax obligations and success.