Last year was certainly a challenging one from the standpoint of planning for taxes. Because of this many feel that they should wait to take action and that could have a very negative impact on their planning. Since Congress and the state of Illinois have taken action to change their tax laws, a short window of opportunity is open. People should be getting their affairs in order to take advantage of the planning opportunities available now.
The economic situation gets more precarious as the days pass and many experts feel that due to the crisis in the Federal and state governments, action will be taken which end these opportunities.
What should you be looking for? For those business owners seeking to transfer their business to family members, now is the time to act. Congress expanded the gifting provisions so that in addition to annual exclusion of $13,000 per person, the lifetime exemption for transfers by gift has been extended to $5,000,000. This presents a great opportunity that did not exist prior to the law change – to make a transfer by gift and not have a tax bill to pay
Many things must be set in place before the gift actually takes place and it takes time to get them all done so the transfer occurs as planned. Valuation of the business, the timing of the transfer, the entity to transfer to, making sure the key employee team is in place and can function with the new owners flawlessly and the long term continuation of your legacy are all important to making sure the transfer goes as planned and accomplishes the desired result. Also, making sure that the business you’ve spent a lifetime creating and building will not lose value after you no longer are running it, are all critical issues that should be addressed.
It is always difficult to change the way you look at “your” business and your day to day involvement in it, but every business owner faces just that situation at some point. You should be thinking about maintaining the value as the transition occurs and providing you and your family the benefit you so rightly deserve.