Estate Tax Planning

AN ESTIMATED $10 TRILLION, MUCH OF IT IN THE FORM OF FAMILY BUSINESSES, HAS BEGUN CHANGING HANDS FROM ONE GENERATION TO THE NEXT.

ESTATE PLANNING CAN PROVIDE A LASTING LEGACY FOR DESCENDANTS.
A wealthy individual can use gifting as a business succession planning tool and a means of preserving family wealth by protecting it from unnecessary taxation. Gifting can be leveraged with well supported valuation discounts:
The key question is: How much of a discount can be taken for the lack of control and the lack of marketability for various gifting situations?

  • Family Limited Partnership (FLP)
  • Limited Liability Corporation (LLC)
  • Grantor Retained Annuity Trust (GRAT)
  • Fractional interests in real property
  • Qualified Personal Residence Trust (QPRT)
  • State Trust

DISCOUNTS VARY
There is no computer program that offers optimal applicable discounts for minority interests. The percentage discount for one estate situation may or may not be applicable to another, and a discount determined in one state may not be acceptable in another. Recent changes in case law at both the federal and state levels must be considered.

IRS CHALLENGES
For determining applicable discounts, there is a sound and reasonable framework for valuation, but there is no standard formula. The courts are beginning to scrutinize the valuation process, not just the valuation conclusion. There remains, as well, the possibility that tax courts may reexamine valuation conclusions at a later date, as case law is amended over time.

Recently, the IRS has focused on 1: whether a FLP or trust has a “business purpose” or is merely a tax dodge and 2: whether or not the valuation is accurate. Although government scrutiny is facilitated by the 1998 Gift Tax Return check box, an appraisal report by Appraisal Economics’ trust and estate valuation services can help make sure clients are well protected.

DISCOUNT EXPERTISE
It is imperative to document the economic features of assets placed in a vehicle that gives rise to discounts. A well-supported and documented appraisal report articulates the reasonableness of the valuation conclusions.

At Appraisal Economics, we have years of experience in trust and estate valuation services, including determining discounts. We have ready access to current data on which to base our conclusions of value. Most importantly, we have extensive successful litigation experience, including work performed for the IRS. This has tested our methodologies and refined our expertise in determining how aggressive or conservative discounts should be.

APPRAISAL ECONOMICS WORKS CLOSELY WITH ATTORNEYS, ACCOUNTANTS AND FINANCIAL PLANNERS
Our staff is experienced in appraising many types of commercial interests, as outlined below, for estate tax compliance. Date of death appraisals clearly provide supportable conclusions of value and take into consideration the terms of any existing buy/sell agreements. They conform to the federally mandated Uniform Standards of Professional Appraisal Practice.

EXPERTISE IN VALUING A WIDE RANGE OF ASSETS FOR TAX PLANNING AND TAX COMPLIANCE

  • Buy/sell agreements
  • Closely held businesses
  • Commercial real estate
  • Contracts
  • Customer lists
  • Financial damages
  • Leases
  • Machinery and equipment
  • Majority interests
  • Minority interests
  • Natural resources
  • Options/warrants
  • Partnership interests
  • Patented technology
  • Real estate investment trusts
  • Software
  • Special-purpose properties
  • Split-dollar agreements
  • Technology in the R&D stage
  • Trade names
  • Trademarks
  • Unimproved land