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Thoughtful estate planning and business succession strategies provide the greatest opportunity to maximize wealth for business owners.
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When it comes time for a business owner to transition or sell their business, taxes tend to be one of the most important considerations. Over the past several years, income tax reductions in the form of credits and deductions as well as reduced tax rates included in legislation have increased the value of businesses. However, with the sunsetting of that legislation and the addition of tax provisions included in the recently passed Inflation Reduction Act, it has become more important than ever to ensure proper tax planning.
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The lifetime gift and estate tax exemption is scheduled for reduction, from $12.06 million per taxpayer in 2022 to approximately half that amount on January 1, 2026. Interest rates are expected to increase, and the values of many businesses are depressed in the current economic environment. Against the backdrop of these combined developments, now may be the optimal time for business owners to implement tax-efficient strategies, so they can protect the value of their legacy.
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Throughout the cycle of building, operating and ultimately transitioning a business, a variety of strategies are available to help protect the value of a business from state and federal income tax as well as lifetime gift and inheritance taxes.
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Going into the sale of a business, many questions may arise regarding how to manage income tax associated with the sale. These income tax concerns exist regardless of the year of the sale, and as the favorable current tax legislation sunsets, planning needs to begin.
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If a sale will occur five years from now, there continues to be income tax considerations but there are also estate tax complications. Assuming the business continues to grow during this five-year period, advanced planning can help shift appreciation so it is captured outside of the taxable estate. The three pillars of advanced planning focus on:
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About BNY Mellon Wealth Management
For more than two centuries, BNY Mellon Wealth Management has helped families build, manage and preserve their wealth. Our specialized teams have the tools, knowledge and experience to develop comprehensive solutions for our business owner clients that address each client’s personal financial objectives and family dynamics, as well as issues specific to his or her business. For business owners considering a family office, our dedicated Family Office team brings more than 50 years of experience providing solutions and strategic insights to help family offices grow and preserve wealth across generations. For more information, visit www.bnymellonwealth.com or follow us on Twitter @BNYMellonWealth.
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Please stay safe and healthy,
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pmsoldano@family-enterpriseusa.com
712 H Street NE Suite 1330
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Upcoming Events
- October 20: University Business Center, Fresno, CA
- October 20: Institute for Family Owned Business, Maine
- October 22 & 23: Attend and Present at American Trucking Association, San Diego, CA
- October 25: BNY Mellon webinar, virtual
October 26: Loyola Marymount University, virtual
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We hope you’ve enjoyed this article. While you’re here, we have a small favor to ask…
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As we prepare for what promises to be a pivotal year for America, we’re asking you to consider becoming a member.
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The need for fact-based reporting of issues important to multi generational businesses and protecting a lifetime of savings has never been greater. Now more than ever, multi generational businesses and family businesses are under fire. That’s why Family Enterprise USA is passionately working to increase the awareness of issues important to generationally-owned family businesses built on hard work, while continuing to strengthen our presence on Capitol Hill.
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About Family Enterprise USA
Family Enterprise USA advocates for American Family business. We help family businesses communicate their challenges and contributions to American economic freedom to Legislators. We represent all American family businesses; not just specific industries and provide research to enhance the opportunity for success. We help family businesses continue to establish their unique business legacy. Family Enterprise USA is a 501(c)(3) non-profit organization.. Family foundations can donate.
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Have questions or would like more information about becoming a Member or donating? Please contact John Gugliada at jgugliada@family-enterpriseusa.com.
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Family Enterprise USA Sponsors
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