Valuation NewsFlash: Gift and estate planning opportunities for business owners from Congress

January 17, 2011

With the passage of the new 2010 Tax Relief Act, Congress just made it easier for business owners intending to make a substantial wealth transfer.  Given the current political environment, this is the prime time to take advantage of this opportunity, because the law might get changed without much advance notice.

The 2010 Tax Relief Act has increased the lifetime gift exemption cap to $5M from $1M, but just for 2011 and 2012. In the past, business owners structuring a major wealth transfer to their children often ran into the problem of not having enough lifetime gift exemption… and business owners were generally reluctant to pay gift tax on such a transfer. The increased lifetime exemption cap provides business owners with a great (albeit temporary) opportunity to reduce the size of their estates.

Also of note… Although restrictions on the use of common valuation discounts in valuing business interests have been proposed recently by legislators, the 2010 Tax Relief Act contains no such provisions.

As always, a properly executed estate planning strategy involving transfers of business ownership interests will require an objective and well-supported valuation analysis. For information about how Aronson’s Forensic & Valuation Services Group can provide assistance in this area, please contact Stuart Rosenberg or Bill Foote at 301.231.6200.