Business succession planning continues to be an important theme for business owners and their advisers. The elements are all in place: a growing number of baby boomers who own businesses are reaching retirement age; business values continue to be off their peaks, making the transfer of business interests less expensive; and now, with the passage of last year’s Tax Relief Act (easier to remember than the much longer name of the law), tax law changes have made transfers more tax efficient.
Lower Federal Estate Tax Rate
Several provisions of that new law make succession planning easier. The most basic of these provisions is the lower federal estate tax rate. A flat rate of 35 percent means that even assets that are taxed will be subject to a lower tax. The advantages of this lower rate are obvious — less is taken by taxing authorities, making it less often necessary, if it ever is, for a business to be sold to pay estate taxes. It’s probably more accurate to say that the lower tax rate makes it easier to plan the family business transition process.
Increased Estate Tax Exemption
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