Transferring your estate to the next generation can be a daunting planning goal. Procrastination often prevails and a golden planning opportunity is lost. Aside from the obvious tax consequences associated with wealth transfer, the transfer of ownership of a family business requires forethought and planning to address non-financial transfer issues as well. Chances are that sooner is the best time for you to develop your estate transfer plan, not later.
For a family business owner, a key estate transfer question is whether “equal” means fair to the children who are either not involved or only partially involved in the business. Family wealth can be difficult to divide, especially a business interest, so estate transfer planning techniques may range from life insurance to advanced estate planning to engender a fair and equitable division of wealth among the family.
The traditional estate transfer objective has been estate tax avoidance or creating estate liquidity after death. Estate freeze strategies that transfer ownership of a rapidly appreciating business or real estate to the next generation during your lifetime can restrict the size of your estate by transferring future appreciation of the assets to your children and grandchildren.
A grantor retained annuity trust (“GRAT”) is an estate freeze strategy that removes rapidly appreciated assets from your estate during your lifetime; same goes for a qualified personal residence trust (“QPRT”). A family limited partnership is another good way to freeze the value of your estate while maintaining full control of your business enterprise.
The successful transfer of your wealth just doesn’t happen – it must be planned. The earlier that you start the transfer planning process, the more planning options will be at your disposal. Seek the assistance of qualified legal and wealth management professionals to do it right.
