Saturday, April 02, 2011 3 Reasons that the Stars have Aligned for Boomer Exit Planning
Baby Boomer business owners contemplating exit planning (succession planning) and wanting to transfer their business to a child, key employee or co-owner (aka “Insider”) have reason to believe that the stars have aligned to accomplish their goals.
BridgeBuilder – Plans for Life, a Kansas City exit planning and succession planning practice that represents privately and family-owned businesses throughout Kansas and Missouri has identified 3 key current factors that make transferring a closely-held business to an Insider very favorable. Those are:
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Tax Relief Act of 2010
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Presence of Valuation Discounts
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Relatively Low Interest Rates (Applicable Federal Rate “AFR”)
Today, I want to highlight that families now have a window of opportunity to transfer a significant ownership interest in their businesses to the next generation with minimal or even no tax. The Tax Relief Act of 2010 passed by Congress late last year, increased the gift-tax exemption from $1 million to $5 million for individuals and from $2 million to $10 million for couples in 2011 and 2012. For further detail, see Jason’s discussion on Congress Gives Its Biggest Gift Ever.
Essentially, this increased gift-tax exemption allows owners of closely-held businesses the ability to transfer substantial business assets to Insiders, in many cases with no tax. This temporary tax law coupled with relatively low interest rates and the ability of families to use valuation discounts, presents many unique planning opportunities. Next time, I’ll explain the use of valuation discounts and how they can maximize tax free transfers.
BridgeBuilder
Garrett Griffin |