Planning for the family business

Reasons to Plan

For certain business owners, it is essential to address the following concerns;

  • Passing the family business intact to the next generation
  • Providing an equitable inheritance to all children when one large asset may not be easily divided
  • Payment of income tax due on certain qualified retirement plan assets when received by the heirs
  • Payment of expenses incurred when the estate owner is not able to care for himself of herself.  Payment of these expenses acts to reduce the amount of inheritance for surviving family members

Estate Planning Solutions

Lifetime Gifts

Giving away assets during your lifetime is an ideal strategy to reduce the size of your gross estate.  The annual exclusion permits gift amounts up to $12,000 per donation recipient, with no gift tax.  This amount can be doubled to $24,000 if the spouse also makes a gift.

Charitable Gifts

Charitable giving can be a powerful estate planning tool.  Gifts to some charities may provide not only estate tax savings, but income and gift tax savings as well.

Charitable Remainder Trusts

A charitable remainder trust is an estate planning tool that allows you to remove highly appreciated assets from your estate and provide an income stream to you or your designated heirs.  Benefits include potential income tax, gift tax and estate tax savings.

Family Limited Partnership

This tool places assets (cash, stock, real estate, etc.) into an entity called a family limited partnership.  Shares of the limited partnership may then be gifted to family members while you maintain the right to actively control the partnership.  The result is that the value of the partnership, and therefore the estate, can be reduced, which controls estate expenses.

Qualified Terminable Interest Property (Q-TIP) Trust

Through this trust arrangement, assets pass to the surviving spouse with a portion earmarked to ultimately pass to other designated heirs.  This approach is especially useful in second marriage situations, when assets may be preserved for children from a previous marriage.

Section 303 Redemptions

The estate planning tool enables your company to buy back stock form your estate without the distribution being treated as a dividend for income tax purposes.  The value of your stock need only exceed 35 percent of your adjusted gross estate.  Such a sale covers only amounts necessary to pay estate taxes and administrative expenses, but may be an ideal method to provide estate liquidity.

For more information or a customized quote, contact a life specialist at 1.800.396.5993 or email us at