Did you know that more than 70 percent of family businesses in the U.S. are successful for just one generation? Most simply aren’t sound enough for the transition and even if they are, the challenge becomes getting through the legal red tape of the transition. Gone are the days when land stayed in families for generations, each new son determined to work the land so that it can sustain not only his family, but his grandchildren and ideally, their grandchildren. One of the biggest culprits in current day is the tax burden. Estate taxes are problematic on a number of levels; unfortunately, those aren’t the only financial drains. There are things we can do now to offset those potential problems after we’re gone and make the most of our asset protection efforts while ensuring you leave a powerful legacy in the form of your family business to your heirs.
Land Owner’s Burden
Most farmers and ranchers struggle with one particular troublesome reality: the biggest investments they make – their machinery, land and livestock – looks good on paper from an investment perspective; the cash flow is usually entirely different. Throw estate taxes into the mix and those investments can become quite burdensome for your heirs.
These estate taxes are computed on the current value of the assets, including life insurance, annuities, and of course, any livestock and machinery. If there aren’t resources available for heirs to cover those taxes, most often, they’ll sell off in order to find balance.
There are options, however. For those who have planned ahead, there are ways that your estate is passed on in a way that won’t cause financial hardships to the recipients.
The National Federation of Independent Business has worked with small- and family owned businesses for years. It’s the voice of those business owners in D.C. and as a result, it’s made impressive strides. On January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (ATRA). As part of that passage, there exists a permanent extension of the $5 million exemption. This helps tremendously as those business owners put their estate planning efforts into high gear.
Family owned businesses in Beverly MA, after years of these overwhelming taxes, finally have a shot at passing down their businesses to the next generation with a realistic belief that the momentum isn’t lost in the red tape.
As estate planning lawyers, it also means our clients have more options when it comes to holding on to their assets. Fewer sacrifices, lower taxes and hope for the future is what every business owner wants.
Separating Fact from Fiction
Proper estate planning is key. Contrary to what some believe, it’s not an overwhelming expense to put those documents in place that will reduce or eliminate problems in the future. When you have those bases covered, the courts rarely become part of the quagmire. You’re also reducing the odds that lawsuits and creditors become part of your heirs’ future. Remember, asset protection means different things for different people.
There’s another mindset too, when it comes to asset protection and estate planning. Many people are under the assumption that getting around the law is the only way to protect their estates. That’s likely because many believe it’s all about “hiding” assets from creditors or they equate it to lawsuits being filed because someone wants to take things that don’t belong to them. The truth is, asset protection is –or should be – about working within the legal boundaries with a transparency and commitment to ethics. When we’re above board in our efforts, there leaves no fear of the unknown for the future and what it could mean for your loved ones.
You’ve worked hard to build your family business in Beverly MA. Ensuring it remains within your family after you’re gone is something you can decide and it’s the decisions you make that determine whether or not your family business continues on or folds when you’re no longer here to cover those bases.