Donald M. Thompson - Wills, Trusts, and Estate Planning


Gifts of Family Business Interests

One of the simplest techniques in estate planning for business owners is to give interests in the business to children while alive. The interests can be non-voting interests. The interests will also usually be minority interests and they qualify for a discount in value. Substantial value can be transferred this way by making initial gifts of the tax free amount ($1,500,000 in 2004) to the children. Also, each year, each parent can give $11,000 worth of business interests to each child. If one of the parents does not own any of the business the owning parent can transfer any amount of the business to the non-owning parent tax free because of the unlimited marital deduction. Over time a very significant value can be transferred to the children this way free of estate and gift tax, especially if the value of the business is appreciating. Note that taxable income can also be transferred to the children this way.

The gifts can be made to the children outright or to the gifts to them can be made to a trust for their benefit.

Use of this device requires an appraisal whenever gifts are made and business appraisals are expensive so that must be considered when using this device.

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Donald M. Thompson * 55 W. Monroe #3950; Chicago, IL 60603
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