Gifting and Estate Planning

Business Valuations for Gifting and/or Estate Planning

Joey Friedman CPA PA, led by Joey Friedman, CPA, is a trusted provider of business valuations for estate and gift tax purposes. As an experienced and accredited firm, we understand the importance of accurate and comprehensive valuations when it comes to gifting and estate planning for closely-held businesses. This article will provide an in-depth look at the significance of business valuations in estate and gift tax planning, as well as related services we offer to our clients.

Overview Of Gifting and Estate Planning

Estate and Gift Tax Valuation Importance

Estate and gift taxes are levied based on the fair market value of assets within an estate. When an estate includes an interest in a closely-held business, a professional business valuation is necessary to determine the value of that interest. A well-documented, third-party business valuation should be filed alongside an Estate and Gift Tax return to ensure tax compliance and avoid potential disputes with tax authorities.
In the case of a shareholder’s death, a comprehensive business valuation is crucial for tax compliance purposes. Joey Friedman CPA PA employs a widely accepted valuation method that aligns with the American Institute of Certified Public Accountant’s Accredited in Business Valuation (ABV) criteria and adheres to valuation guidelines established under Revenue Ruling 59-60 for gift and estate tax purposes.

Minimizing Estate Taxes Through Planning​

Effective tax planning by a business owner ahead of their death can help minimize estate taxes. Knowing the value of their company enables the business owner to arrange sufficient liquidity (typically through life insurance) to cover estate taxes. In addition, a business owner may opt to reduce future estate taxes by gifting shares of their company stock during their lifetime to their eventual heirs. To ensure the legitimacy of these gifts, an accurate and up-to-date business valuation is required.

Majority and Minority Interests​

Business interests can be classified as either controlling (majority) or minority interests. Valuations of minority interests in closely-held family limited partnerships (FLPs) or limited liability companies (LLCs) often involve significant discounts for lack of control and lack of marketability. These discounts can greatly impact the overall valuation of the business, making a well-documented valuation report essential.

When determining the value of a minority interest, the valuation expert considers factors such as the company’s financial performance, the nature of the business, and the overall economic outlook. The valuation report should provide a thorough analysis of these factors to support the discounts applied to minority interests.

Related Business Valuation Services​

Joey Friedman CPA PA offers a range of business valuation services that complement our expertise in gifting and estate planning, including:

  • Succession Planning: We assist business owners in developing a strategic plan for the successful transfer of their business to the next generation or a new owner, taking into account tax implications and maximizing the business’s value.
  • Gifting of closely-held stock and partnership/LLC interests: Our team helps clients with the process of gifting business interests to family members or other recipients, ensuring accurate valuations and adherence to tax regulations.
  • Creation of non-voting stock for gifting purposes: We guide clients in creating non-voting stock, allowing them to retain control of their business while gifting equity to heirs or other recipients.
  • Date of death valuations for estate purposes: Our experts provide accurate and defensible valuations of business interests as of the date of death for estate tax purposes.
  • Whole or Fractional Ownership Interests in FLPs, LLCs, or Closely Held Businesses: We have experience in valuing both majority and minority ownership interests, considering factors such as control, marketability, and other relevant issues.

A well-prepared business valuation is crucial for gifting and estate planning purposes. Joey Friedman CPA PA’s team of experienced professionals is dedicated to providing clients with accurate, well-documented valuations that comply with relevant tax regulations and guidelines. Our comprehensive approach ensures that our clients have the information they need to make informed decisions about estate and gift tax planning, while minimizing potential tax liabilities and protecting their business interests.

Benefits of Professional Business Valuations

There are several key benefits of obtaining a professional business valuation for gifting and estate planning purposes:

  • Compliance with Tax Regulations: A comprehensive business valuation conducted by an accredited professional ensures that you are in compliance with tax regulations, reducing the risk of disputes with tax authorities.
  • Accurate Valuation: A professional business valuation provides an accurate and defensible value of your business interest, supporting your estate and gift tax planning strategies.
  • Informed Decision Making: Knowing the value of your business allows you to make informed decisions about gifting, succession planning, and other aspects of your estate plan.
  • Minimization of Tax Liabilities: A well-documented business valuation can help you minimize your estate and gift tax liabilities by identifying potential discounts for lack of control and lack of marketability.
  • Peace of Mind: Obtaining a professional business valuation gives you the confidence that your estate and gift tax planning strategies are well-founded and compliant with applicable tax regulations.

At Joey Friedman CPA PA, our commitment to excellence in business valuations for gifting and estate planning purposes ensures that our clients receive the highest level of service and expertise. We understand the importance of accurate and well-documented valuations in protecting your business interests and minimizing tax liabilities, and we are dedicated to helping you navigate the complexities of estate and gift tax planning.

To learn more about our business valuation services and how they can benefit your gifting and estate planning strategies, contact Joey Friedman CPA PA today. Our team of experienced professionals is ready to assist you with your business valuation needs and provide you with the information and guidance necessary to make informed decisions about your estate plan. Don’t leave your business’s future to chance; let our expertise help you protect your legacy and secure your family’s financial future.

Joey N. Friedman, CPA, ABV, M.Acc, MIB

Effective tax planning by a business owner in advance of their death can help minimize estate taxes. Knowing what their company is worth can be used to help the business owner arrange adequate liquidity (usually through life insurance) to cover the estate taxes. Additionally, a business owner may choose to reduce future estate taxes by gifting shares of their company stock, during their lifetime, to the eventual heirs. This gifting of share requires an accurate and up to date valuation of the business.

The majority and Minority Interests

A business interest can be a controlling (majority) or a minority interest. Valuations of minority interests in closely held family limited partnerships (“FLPs”) or limited liability companies (“LLCs”) often involve significant discounts for lack of control and lack of marketability. Because these discounts have such a large impact on overall valuation, a proper and well-documented valuation report is critical.

Related Business valuation services offered include:

  • Succession Planning
  • Gifting of closely-held stock and partnership/LLC interests
  • Creation of non-voting stock for gifting purposes
  • Date of death valuations for estate purposes
  • Whole or Fractional Ownership Interests in FLPs, LLCs, or Closely Held Businesses

FAQ

Gift and estate planning involve strategically managing your assets and wealth to ensure a smooth transfer of your estate to your beneficiaries while minimizing taxes and potential legal complications. It is essential to secure your loved ones’ financial future and preserve your hard-earned assets.

Gifting can be a powerful tool for reducing your taxable estate and maximizing the wealth you pass on to your heirs. By making strategic gifts during your lifetime, you can minimize estate taxes and provide immediate financial assistance to loved ones.

You can gift various assets as part of your estate plan, including cash, real estate, stocks, bonds, valuable personal items, and even business interests. Discussing your options with a professional can help you make informed decisions based on your specific financial situation.

Yes, there are tax implications to consider when gifting. Depending on the value of the gift and the prevailing tax laws, gift taxes may apply. However, working with experienced estate planners can help you navigate tax-efficient gifting strategies.

Yes, gifting can significantly reduce the size of your taxable estate. By transferring assets to your beneficiaries before your passing, you decrease the overall value of your estate subject to estate taxes.

The annual gift tax exclusion allows you to gift a certain amount to an individual each year without triggering gift taxes. This exclusion is subject to change based on tax laws and is an essential tool for tax-efficient gifting.

If you find it challenging to keep track of your finances, struggle with budgeting, need assistance in financial decision-making, or want to enhance your business’s financial performance, then professional financial management services are the ideal solution.

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