The U.S. Treasury Department and Internal Revenue Service have recently proposed new regulations that would make it harder for some family and closely-held business owners to transfer assets to their heirs without paying estate and gift taxes.
This article from the Wall Street Journal details the proposed regulations. The plan would place new limits on the practice of discounting the value of ownership stakes in closely held businesses. Currently, these discounts are permitted because some stakes are worth less for a variety of reasons – they may be harder to sell or represent a minority interest. This allows the overall value of the shares to be appraised for less, enabling them to remain within the $10.9 million lifetime exclusion from estate and gift tax for married couples.
These new rules could make financial planning more complicated for many family business owners, and there is only a brief window of time to take action before they are enacted. Portions of the regulations may go into effect after a 90-day public-comment period, so we encourage you to contact GCW Capital or your own financial advisor as soon as possible if you have questions or concerns about how this may have an impact on your future business plans.