There are many different approaches to estate planning process that can be implemented depending on the circumstances. This is why you should definitely discuss your particular situation with a licensed attorney that can explain your options to you.
Estate planning for family-owned businesses and farms can present unique challenges, but there are solutions. The key is to act in a fully informed manner, and this is exactly what you will be able to do when you connect with our firm.
The best way to describe this particular family-owned business estate planning scenario is through the utilization of a simple example. Let’s assume that you own a very successful restaurant and cocktail lounge, and you have two children.
Your son has always been interested in the business, and he has worked beside you all of his adult life. The other child that you have is your daughter, and she decided to go in a different direction. She simply does not want to be involved in the restaurant business on any level.
This restaurant is your most valuable possession by a very wide margin, and you want to leave it to your son for obvious reasons. At the same time, you love both of your children equally, and you don’t want to provide disproportionate inheritances.
Under these circumstances, you could balance inheritances through the utilization of life insurance. You could determine the value of the business and take out a life insurance policy on your life that is equal to this amount.
Your daughter would be the beneficiary, and after your death, she would receive the proceeds. Meanwhile, your son would be able to carry on and operate the family business independently.
A buy-sell agreement is another estate planning device that involves the purchase of life insurance. If you are a partner in a business with a relative (or anyone else for that matter), you can enter into this type of agreement as an inheritance planning tool.
You and your partner would get together to agree upon the value of each share in the business. After this has been determined, you take out life insurance policies on one another’s life with payouts that equal the value of a business share.
When one partner dies, the survivor would collect the proceeds. They would be used to purchase the share that was owned by the deceased partner from their family.
Family Farms and Estate Tax Liability
There is a federal estate tax in our country that carries a heavy wallop with a 40 percent maximum rate. The good news is that most people do not have to pay it, because there is a high credit or exclusion that you can use to give a certain amount tax-free.
Since it is adjusted annually to account for inflation, we will not give the precise number, but suffice to say that is in excess of $11 million.
A significant percentage of family farmers are in a position that is often referred to as “land rich and cash poor.” They are in possession of huge tracks of land that are very valuable. In many cases, the family obtained the land when real estate was much less expensive than it is today.
They work the land to make a living, but they are not on easy street by any stretch of the imagination. In spite of this, if the property is worth more than the amount of the federal estate tax exclusion, the estate tax would be a factor for surviving family members.
We have the expertise that it takes to respond to these situations. There are steps that you can take to mitigate your exposure to the federal estate tax if you are a farmer. Our firm can gain an understanding of the situation and provide you with the appropriate guidance to preserve your legacy.
We Are Here to Help!
If you are interested in putting an estate plan in place as a family business owner or farmer, our doors are open. You can send us a message to request a consultation appointment, and our phone number right here in Bluffton is 843-815-8580.