March 27th, 2019

Business Succession Planning: Ideas to Deal with Taxes

Sufficient planning is always essential for your business to secure it from different risks. Every business owner should pay attention to Estate and Succession Planning to sell your business or keep it within your family after your death. Regardless of available options, you have to pay attention to careful planning to keep the company running successfully and protect it from unexpected and significant tax liabilities. 

Validation is necessary for business assets to make you a legal beneficiary. You are allowed to name possible beneficiaries. GRATs or GRUTs trusts allow adequate growth of assets of your trust to satisfy the requirements of a taxable estate. You may find it essential to consult an accountant or a tax preparer about particular circumstances.

Tax Considerations and Penalties

You have to understand that the value of your organization may consistently grow between your planning for real estate and time of death. The taxable land will contain the value from the date of your demise. Check the possible tax deductions because a long list is available by the IRS. Sometimes, the defense cost of Phoenix DUI Lawyer can be deductible, so don’t ignore any opportunity. 

If you have DUI charges in the current year, you can get the advantage of write-offs. Special rules are available for non-business and business taxpayers. Deduction of DUI charges may depend on the taxpayers. If DUI defense cost is associated with your business, you can get a deduction on it. Keep it in mind that IRS can deny your application to deduct your DUI costs based on the nature of charges and penalties. 

Leaving Your Business for Co-owners

If a business has one or even more co-owners, you can establish an agreement for this business that after the demise of any proprietor, the other proprietor(s) will automatically purchase the interest. Just like a buying and selling agreement, this arrangement can be beneficial for the heirs of the deceased owners, such as spouses and family members. You can purchase life insurance, or ILIT (irrevocable life insurance trust) may be a good option to cover buy and sell agreements and offer liquidity.    

Produce a Succession Plan

The succession plan of business must address the orderly transfer of ownership and management of a business. The Estate and Succession Planning can have:

  • Support, training, and development of successors
  • Allocation of authority and responsibility to successors
  • External advisors and successors to increase the necessary objectivity of procedures
  • Exploiting the retention of main employees through reasonable compensation planning for family and non-family workers, inactive and active shareholders and management

Planning for the Transfer of Ownership

You should have special planning considerations, such as:

  • Synchronization between a new business owner and new business manager
  • Time to transfer business during your life. It will be beneficial for you because you can consult with the successors and decrease the risk of discounted business sales.
  • Contemplation of the best opportunities for the business and family members      

Steps to Maximize Taxes and Evade Validation

The gap amongst the worth of your business while you are planning your estate and its actual value after your demise along with other liquidities issues may need ILIT for proper management. If the structure of ILIT is correct, you can get the benefits of the underlying insurance policy. It will not pass through validation and available instantly to provide cash for taxes on the estate and other necessities.

You can transfer the assets of your business to children and make them a good source of income for yourself by establishing an annuity trust. If the assets proliferate, it will become a useful tool for the growth of your business to manage estate taxes. These trusts may become an efficient tool to pass on your growing businesses. To obtain tax benefits from trusts, the trusts should be structured, and you have to outlive the particular term of the trust. The structure of ILIT can be an excellent option to mitigate risk as a replacement of wealth to offset potential tax liability that may occur in case of your death before the expiry of trust.

Family Limited Company

For estate and succession planning, you can consider another option, such as family limited company or family limited liability partnership. For instance, you may ally to hold the assets of the business. Some restricted units of association may be transferred to successors. It will eliminate these units from a taxable estate. The interests of limited partnership may not carry control of collaboration and value of transferred assets can be discounted for the gift purposes. With trusts, your family limited partnership will be subjected to complicated rules so you should consult a tax preparer and other professionals, such as estate planners.

After estate and succession planning, you will be able to avoid significant tax burdens on your business organizations. 

Property Tax Appeals

Before Appealing Property Tax bills, you have to evaluate your real estate. You can trim the tax bill of your property by appealing the value of assigned taxman for your home. The estimated cost is calculated to determine tax you are liable to pay. You can decrease the tax on property by reevaluating the value of your house. If it proves that the value of your property is assessed extremely high, the procedure of appealing may stretch out for some extra months. The chances are high that you may pay more tax on property because of its wrong evaluation. As per Taxpayer Union, almost 60% properties of the United States are evaluated at a high amount instead of their actual value. 

Chances of Appeal for Property Taxes  

State governments assess all taxable properties periodically. When you get a new assessment in the mail, you have to read it carefully. This assessment will list information about the property, such as legal description, size and evaluated worth of your land or house. The tax bill of the property will be based on this worth. The assessed value of your house is multiplied by the state tax rates that may vary from city to city. If you feel that the assessment of your home is higher than its actual value, you can immediately challenge it. You will get almost 30 days or even less to challenge it because each taxing authority has its particular timeline. You can see the procedure on the back of the assessment letter.

Before Appealing Property Tax, you have to decide the efforts that you want to put in appealing. For instance, the average property tax of 2018 was almost $2,000, and it is nearly 1% of nearly $200,000 average value of the home.

You may get a chance to lower the assessed value by fifteen percent to nearly $170,000 and save 15% on property tax. It will decrease the tax bill to almost $1,700 and save almost $300. In numerous parts of Texas and New York, the tax rates may approach 3% of the value of your home. It can decrease your potential savings. The U.S. median and home prices are subjected to these effects. You can hire a Tax Preparer for your assistance.

Evaluate Data

Evaluate the data to ensure that the information about your house is accurate. See the number of bathrooms, fireplaces, size of the lot, etc. You have to understand the difference of 3.0 acres and 0 Acres. If you find the wrong facts, you will find it easy to challenge this evaluation. 

Acquire the Comparisons

You have to compare 3 to 5 properties that are recently sold. This process is known as “comps” in the language of real estate. You can check an online website and see the estimated worth of comparable properties that are similar to your property as per location, condition, style, and size. If you want to shell out a particular value, such as between $400 and $750, you will need an appraiser to get a professional estimation of the value of your home.    

After identifying comps, you have to check assessments on these properties. Numerous local governments manage databases of the public. You may seek the assistance of an agent in the absence of a public database or ask for the tax information of neighbors. If the valuations on comps are lower, you may argue that yours is high.    

Present a Case

After your research, it is time to call the local office of assessor. Some assessors can discuss these assessments on the phone, or they may ready for an official review. Carefully see the procedures and deadlines. You may get a form to fill out and particular instructions to support evidence. A specific review may not require you to appear personally. These may take 1 to 3 months. You will get a decision in writing.

Appeal for a Dissatisfactory Review

If you are not satisfied with the review, you can send an appeal against the decision to a self-governing board. You can hire a lawyer as per your convenience. You will have to pay some filing fee such as $10 – $25. In vast dominions, your appeal may stretch to a year because of their maximum number of previous appeals.

Jamshaid Chaudhary

I began writing as a professional on my personal blog and then discovered my true calling, which is writing about technology, News and gadgets in general. I am a technical writer, author, and blogger since 2010. An industry watcher that stays on top of the latest features, extremely passionate about juicy tech news and everything related to gadgets. For tech tips,