Protect Your Legacy
We are often asked, “How do I reduce my tax burden when I sell my business?”Many strategies can be implemented and you can read a previous blog in which I wrote about them here.
Today, it’s all about the tax changes coming. Here at Legacy Partners, we understand the importance of staying ahead of the updates, some of which are going to impact estate planning. In particular, the increased federal estate tax exemption under the Tax Cuts and Jobs Act, currently $13.61 million per person ($27.22 per married couple), is scheduled to sunset at the end of 2025.
Sunset…such a nice word. What does it mean? It means the new dawn will be a much lower exclusion amount meaning of course higher taxes due. It’s expected to be reduced to around $6.8 million per person effective January 1, 2026.
As trusted advisors to many business owners, we recognize the significance of seizing opportunities before the Estate, Gift and Generation Skipping Transfer (GST) regulations shift. Currently, there’s a window of opportunity to take advantage of existing tax exclusion laws. As 2026 quickly approaches, it’s time to explore the impending changes in tax exclusion laws and why business owners should act swiftly to optimize their estate plans before their heirs potentially lose out on millions.
Understanding Tax Exclusion Laws
GST tax exclusion laws determine the amount of assets individuals can transfer to their heirs without incurring federal estate or gift taxes. Currently, the federal estate tax exemption stands at a historically high level.
Impending Changes and Impact on Business Owners
These changes could have substantial implications for business owners, especially those with significant assets. With the possibility of a reduced exemption, it’s imperative for business owners to act promptly to secure their wealth and minimize tax liabilities so that they can protect their legacy for future generations.
Maximizing Opportunities
Given the uncertainty surrounding future tax laws, there’s a critical window of opportunity for business owners to engage in strategic estate planning. Here are some proactive steps they can take:
- Utilize Lifetime Gifting: Taking advantage of the current high exemption by gifting assets during your lifetime can help reduce the size of your taxable estate. Implementing strategic gifting strategies now can transfer wealth to heirs while minimizing tax implications.
- Establish Trusts: Trusts offer a powerful tool for asset protection and estate planning. By creating irrevocable trusts, business owners can safeguard assets and ensure their efficient transfer to beneficiaries. Trusts also provide flexibility in managing and distributing wealth according to specific objectives.
- Plan for Business Succession: Business owners should develop comprehensive succession plans to ensure the seamless transfer of ownership and management of their enterprises. Proper planning can help mitigate potential disruptions and tax consequences for both the business and heirs. Legacy Partners Master Exit Plan provides clear guidance for your next steps.
- Seek Professional Guidance: Navigating the complexities of estate planning and tax laws requires expertise. Working with experienced financial planning and wealth management advisors, as well as having an exit plan in place, can help business owners develop customized strategies tailored to their unique circumstances and objectives.
As tax exclusion laws potentially undergo significant changes, business owners must act swiftly to capitalize on existing opportunities for estate planning. By taking proactive steps now, they can safeguard their wealth, minimize tax liabilities, and ensure a smooth transfer of assets to future generations.
The first step is to create a comprehensive Master Exit Plan for your business, which will empower you with the necessary in-depth information to plan for your future.
Let us help you secure your legacy for generations to come. And do not delay – all estate planners are exceedingly busy.
We’ve also seen a large influx of client valuations so that a proper strategy can be implemented before the sunset provision.
Tick Tock! The early bird always gets the worm.
