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Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
Business Succession Planning
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Business Succession Planning
Business Succession Planning
Business Succession Planning
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Business Succession Planning
Business Succession Planning
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Business Succession Planning
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Business Succession Planning
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Business Succession Planning

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Tax, Legal, And Practical Issues For Business Succession Planning

Tax, Legal, And Practical Issues For Business Succession Planning

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  • 1. Business Succession Planning William A. Price Attorney at Law www.growthlaw.com 1-800-630-4780
  • 2. Business Lifecycle Law Work Sale Or Planned Transfer: At What Value? Cut Transfer Taxes: ESOPs, Estate Plans Protect The Asset: Contracts, Litigation Incorporation Capital Additions, Control, & Buy-Sell Agreements Advisor Work Needed Startup to Exit
  • 3. Agenda 1. Business Issues: Harvest Or Chaos? 2. Buy-Sell Agreements And Other Succession Or Closing Legal Issues 3. Business Sales To Outsiders 4. Disability, Retirement, and Estate Plans
  • 4. Part 1
    • Will your client’s exit from the business create a harvest, or leave the client/client’s family only unprofitable chaos ?
  • 5. Harvest, or Chaos?
    • There is Time To Plan:
    • SBA Research: 66% of businesses survive 2 years or more, 50% 4 years or more, 40% 6 years or more
    • Most Businesses Still Fail :
    • Congressional Budget Office Research: Only 29.1% of business closures rate as successes
    • Source : http://www.sba.gov/advo/stats/bh_sbe03.pdf
  • 6. Failure To Plan
    • No Incorporation
    • No Proof of Independent Contractor Economics/Deals
    • No Estate Plan
    • Personal Liability For Owners
    • Felony: Illinois Employee Classification Act, 820 ILCS 185/1 et. seq.
    • After 2010, Rates to 55% for all estates over $1 million
  • 7. Planned Exits
    • Annual Profits Determine Sale Values
    • Now 2x profits
    • Up to 5x possible in better economy
  • 8. Three Kinds of Owners
    • “ Buy and Hold” owners: Buy a job and hold on to what you’ve got
    • Serial entrepreneurs: Build a business, harvest, build another
    • Institutional managers of money or estates: Charged with orderly disposition of assets, or Exit and Harvest
  • 9. “ Buy and Hold” Life Events
    • Death
    • Disability
    • Divorce
    • Retirement
    • Resignation
    • Owner Discharge of Other Owner(s) For Cause
    • Bankruptcy
  • 10. Bad Faith Is Everywhere Brown’s Chicken: Bankruptcy to protect the convicted felon (daughter of original 67% partner) and parent from $882,00 owed former 33% partner, for breach of fiduciary duty (Popejoy, J., 10/28/2009 judgment, DuPage) Source: http://newsfeedresearcher.com/data/articles_b1/brown-portillo-company.html
  • 11. Paperwork vs. Problems
    • Operating Agreements: Orderly management, regular and transparent accounting, clear and fair basis for owner’s cash or other benefits payments
    • Buy-Sell Agreements: Clear and fair basis for split, and times or events when investor/partner exits are allowed
  • 12. Planning Takes Time
    • Don’t wait until you need to sell : process takes all your time, disrupts operations, can hurt value
    • Too much payout over short time kills the goose that lays the golden eggs : Key-person life insurance may not cover all the value, so partners have to pay huge amount of profits to buy out the widows: partnership will dissolve
  • 13. Tax Rules Affect Plan Timing
    • Subchapter S Corporations convert to C Corp.: 10 Years to exit, or you may have “built-in gains”
    • Partnership distributions could be:
    • (1) Taxed as “disguised sale” under Sec. 707 if within two years of capital contribution;
    • (2) Sec. 704(c)(1) sale to other partners of “hot” assets if distribute to them within 7 years
  • 14. Exit Events And Plan Actions Planned Harvest Death Retirement Bankruptcy Maximize Value With Business Profits Minimize Taxable Estate With Gifts, ESOP, Life Ins., Etc... Funded Buy-Sell Agreement With Clear Basis and Good Accounting Asset Protection For Owners And Family: Multiple Entities
  • 15. Exit Assistance Services
    • Business valuation: periodic update, for estate valuation, buy-sell funding adequacy analysis
    • Banking/Investment Counsel: family asset management/separation from operating entity
    • Business Brokers: Identification of purchasers, esp. for $5m plus companies
    • Business Lawyer: Asset Plans/Protection
  • 16. Who Will Buy The Business?
    • Best: Your Partners or Associates:
    • Plan and fund a fair Buy-Sell
    • Better: Your Competitors:
    • Keep clear business/tax records,
    • show the shop can still make a profit
    • when you’re not there
    • Bad: The ARDC, for Law Businesses
    • Helps your widow close out your files
  • 17. Questions For You
    • What might cause you to need to close/sell?
    • Is My Business Tax-Efficient For Income Tax Minimization? Is My Transfer Plan Tax-Efficient?
    • Is My Business Safe From Inside and Outside Asset Threats Resulting From Operations?
    • Do I Have A Funded Buy-Sell?
    • What Value Could I Get From Profits On Sale To A Competitor?
  • 18. The Big Question:
    • Harvest
    • or
    • Chaos?
  • 19. Part 2 Buy-Sell Agreements and Other Succession Plan Legal Issues
  • 20. Exit possibilities…
    • Closing the business
    • Sales to Co-Owners: Buy-sell agreements
    • Sales to Employees: ESOP and other alternatives
  • 21. Exit 1: Closing up shop
    • “ Responsible Person” tax liability: Penalty if insufficient FICA/FUTA withholding. No BK discharge for this.
    • Liquidation value of assets usually less than “going concern” depreciation allowed. Forced sale/distress sale values even less.
    • Current accumulated debts/payables without future receivables to cover same.
  • 22. Closing: Private Duties
    • Find all accounts payable, accounts receivable (amounts, when due, contact information).
    • Invoice (if not already done) for any accounts receivable, set closing date for reasonable time after moneys expected to come in.
    • If money is available to pay due bills, pay same. If not, but other assets are available and owned by the business, realize on assets and pay all non-termination bills.
    • Prepare all final tax returns, in addition to closing-specific reports (see below).
    • Set aside a reserve for private closing costs and governmental charges due.
    • Prepare report of assets, liabilities, reports made, and final balance to each owner after all payments realized and paid, taxes and reporting done, and costs of closing covered.
    • Issue final distribution checks.
  • 23. Closing: IRS Filings Due
    • Make final federal tax deposits
      • Electronic Federal Tax Paying System (EFTPS) OR
      • Form 8109-B 
    • File final quarterly or annual employment tax form.
      • Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return (PDF)
      • Form 941, Employer's Quarterly Federal Tax Return (PDF)
      • Form 943, Employer's Annual Tax Return for Agricultural Employees (PDF)
      • Form 943-A, Agricultural Employer's Record of Federal Tax Liability (PDF)
    • Issue final wage and withholding information to employees
      • Form W-2, Wage and Tax Statement (PDF)
  • 24. Closing: More IRS
    • Report information from W-2s issued.
      • Form W-3, Transmittal of Income and Tax Statements (PDF)
    • File final tip income and allocated tips information return.
      • Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips (PDF)
    • Report capital gains or losses.
      • Form 1040, U.S. Individual Income Tax Return (PDF)
      • Form 1065, U.S. Partnership Return of Income (PDF)
      • Form 1120 (Schedule D), Capital Gains and Losses (PDF)
    • Report partner's/shareholder's shares.
      • Form 1065 (Schedule K-1), Partner's Share of Income, Credits, Deductions, etc. (PDF)
      • Form 1120S (Schedule K-1), Shareholder's Share of Income, Credits, Deductions, etc. (PDF)
  • 25. Closing: Yet More IRS
    • File final employee pension/benefit plan.
      • Form 5500, Annual Return/Report of Employee Benefit Plan (PDF)
    • Issue payment information to sub-contractors.
      • Form 1099-MISC, Miscellaneous Income (PDF)
    • Report information from 1099s issued.
      • Form 1096, Annual Summary and Transmittal of U.S. Information Returns (PDF)
  • 26. Closing: IRS Entity Filing
      • Report corporate dissolution or liquidation.
      • Form 966, Corporate Dissolution or Liquidation (PDF)
      • Consider allowing S corporation election to terminate.
      • Form 1120S, Instructions (PDF)
  • 27. Closing: Asset Sales (IRS)
    • Report business asset sales.
      • Form 8594, Asset Acquisition Statement (PDF)
    • Report the sale or exchange of property used in your trade or business.
      • Form 4797, Sales of Business Property (PDF)
  • 28. Closing: State Filing
    • Illinois Department of Employment Security: Prepare and file Form UI-2600 , Request for Letter of Clearance
    • Illinois Department of Revenue: Prepare and file Form CBS-1, Notice of Sale or Purchase of Business Assets
    • Prepare and file final income tax returns (individual and organizational).
  • 29. Closing: State forms, Entity
    • Secretary of State, Department of Business Services:
      • Domestic corporation: file BCA-12.20, Articles of Dissolution
      • Foreign corporation: file in own state, in Illinois file BCA-13.45, Application for Withdrawal and Final Report
    • Note also: forms for domestic Articles of Merger, foreign Report following Merger or Consolidation
      • Domestic LLC: file LLC-35.15, Articles of Dissolution
    • Note also: LLC-37.25, Articles of Merger
    • d. Foreign LLC: LLC-45.40, Application for Withdrawal-Foreign
      • NFP, LP, etc... have different forms.
  • 30. Closing: IL special reports
    • Attorney General’s Office: for nonprofits, reports required to Charitable Trusts division
    • Industry-specific regulators have specific termination reports and forms for their regulated entities and individuals (e.g. IL Commerce Commission for utilities, Ill. Commissioner of Banks and Real Estate for such organizations, Ill. Department of Professional Regulation for same).
  • 31. Closing: Local
    • Local governments may also have final report/withdrawal forms.
    • e.g. Chicago Department of Revenue
    • Chicago real estate sales require water department clearance for to verify all bills were paid.
  • 32. Closing Exercise
    • Do liabilities and closing costs exceed assets available?
    • Can you easily find required financial and other paperwork?
    • Has/have the person or persons with windup and closing responsibilities been identified?
    • Does a family/ownership buy-sell or other set of documents say who gets what’s left?
  • 33. Exit 2: Buy-Sell
    • Agenda:
    • A. Buy-Sell Issues, Then
    • B. Buy-Sell Negotiation Exercise
  • 34. Buy-Sell conditions
    • Sale to outsiders
    • Death (yours or a partner’s)
    • Disability (temporary or permanent)
    • Retirement/resignation/discharge
    • Bankruptcy
  • 35. Buy-Sell triggered by death
    • Your death/disability
    • Cash to your spouse/dependents
    • Family or key employee protection in continuing business
    • Formula or insurance to set value
    • Tax structure to minimize gain recognition
    • Your partner’s death
    • Limit transfers to outsiders
    • Avoid retaining family idiots/legacies
    • Time to pay amounts due, if agreement not fully funded
  • 36. Buy-Sell on retirement
    • Cash to fund retirement difficult, unless long time available: separate personal savings plans from buy-sell?
    • Buy-sell needs to tie to 401(k), SEP, or other tax-deferred retirement plans used
    • If employees or others in plan(s), prudent investment fiduciary rules may make retention of retirement assets in company stock difficult: capital shortages possible
  • 37. Retirement sale recap
    • Some value for departing owner’s interest needed to top off savings needs/cover taxes due from departing owner.
    • Owners usually negotiate notice period, valuation basis and distribution period.
    • Recapitalization from new loan or other capital call may be needed to allow departure.
  • 38. Buy-Sell on resignation
    • Dissociation or resignation avoids third party liability, but gives up control.
    • Drafting may allow minority shareholder remedies for oppression … or eliminate them.
    • Valuation disputes are likely.
  • 39. Buy-Sell upon bankruptcy
    • Organization BK voids agreements, so get secured lender status for capital contributions.
    • Individual BK could be grounds for discharge at lower value, per agreement.
    • BK trustee gets charging order in Illinois LLC, not control or right to demand sale, unless bankrupt’s stake controls.
  • 40. Buy-Sell to family
    • Value minimization (death or gift tax) often the issue --see IRS issues slide, following
    • Family Limited Partnership/LLC an option to retain control while giving away value. --IRS challenges, loses
    • Transfer to family of partial interest: Continued minority ownership by family of departed owner a litigation risk.
  • 41. Buy-Sell: practical issues
    • Sale to co-owners/family
    • Problem: People argue about their fair shares of revenue under two conditions:
    • When the business is making money or
    • When the business is not making money.
  • 42. Valuation Methods
    • Valuation is an estimate : sale to outsiders process yields better market, esp. in an “up” economy.
    • Appraisal process one option for agreement (e.g., agree on appraiser, or each pick one and theirs agree on 3d.)
    • Book value, or mark to market value of assets another valuation option
    • Multiplier of earnings another, incl. cash on hand, as additional split rule
  • 43. The IRS and Your Value
    • Buy-Sell Agreement’s Valuation acceptable for estate and capital gains tax purposes if:
    • Bona fide business purpose and arms-length buyer terms and value: IRC Sec. 2703(b)(1), sec. 2703(b)(2 and 3)
    • Obligation binding on seller during life and on estate after death: Regs Sec. 20.2031-2(h)
    • Estate must sell for fixed price at death
    • Price is fixed or determinable by reasonable formula
  • 44. Buy-sell trigger: discharge
    • Could be with or without cause – different values may be given departing owner depending on which
    • Percentage needed to vote for discharge often a super-majority unless misconduct
    • “ Nothing but a felony” is usual owner preference
    • Freeze-out and other minority oppression issue, vs fiduciary duty violation claims
  • 45. Buy-sell trigger: disability
    • Means of determining disability important: tie to duration, medical opinion?
    • Disability insurance may provide cash for funding buy-sell.
    • Temporary disability provisions may be needed so owner can resume control when recovered.
  • 46. Buy-Sell transfer methods
    • Cross-purchase or entity purchase
    • Entity may have cash to reduce gain over basis
    • Insurance can supplement that cash and work with entity cash to cut gain
  • 47. Stock Transfer Limits
    • Buy-Sell must coordinate with these limits: process says how company/others may buy, buy-sell says what purchase price is
    • Provisions vary , as do majorities to allow sale to outsiders/change of ownership percentages
    • S corporation: prohibited transferees
  • 48. Agreement Elements
    • Survivor option to buy
    • Corporation obligation to buy
    • Survivor guarantees corporation performance
    • Corporation obligation to maintain insurance, or funds for insurance for owners as go along, to better protect assets
    • Mixed cross-purchase and entity obligations possible (depends on owner basis/tax minimization benefits of payouts less than basis)
  • 49. Negotiation Exercise
    • Law Practice of A,B,& C
    • $1 million revenue/$500k profits last year
    • A has $500k book of business, B and C have $250k each
    • A ownership basis is $100k, B and C $50k
    • Marriages are fairly stable, partners fairly sane/not abusive to each other and staff
    • Partnership has $250k in the bank
  • 50. Sale to employees
    • Employee (or relatives) sales difficult: hard to generate sufficient cash to support owner retirement objectives
    • Owner departure often means no qualified management in place
    • Owner needs forfeiture provisions for ESOP, so if $$ objectives not met, business reverts to former owner
  • 51. ESOP an option if …
    • ESOP needs large enough employee base to recapitalize the entity
    • ESOP rarely used, since enough cash for selling owner hard to find
    • Tax/employee motivation benefits worth examining
  • 52. ESOP Benefits
    • Deferral of gain if retiring 30%+ owner sells to ESOP and rolls over gains to other U.S. stocks
    • Employee benefit with tax advantages to owner, tax deferral for employees
  • 53. ESOP Loans
    • ESOP borrows to buy company stock: Company can deduct contributions to ESOP up to limit, then also deduct interest paid on loans.
    • Dividends paid on ESOP stock: If passed through to employees or used to repay the ESOP loan, they are also tax deductible.
  • 54. ESOPs cut Transfer Tax
    • Contributions to ESOPs may be deductible to corporation
    • ESOP rollover: defers SB owner sale gain if 30% or more of company owned by ESOP after sale
  • 55. Exit 3: Sale to outsiders
    • Agenda:
    • Business Sale and Purchase
    • Special Guest Speaker: Maximizing Value Before and On Sale
  • 56. Before You Sell
    • Seller should “clear the underbrush”: minority shareholders, seller cash drains, owner classes and other side deals
    • Seller evidence of ownership, clear of liabilities, for all assets
    • Seller business valuation help: Can you improve cash flow?
  • 57. Purchase Process
    • Offer term sheet/negotiate as “letter of intent.”
    • Mutual due diligence
    • Regulatory, title, other presale requirements
    • Closing documents for all assets
  • 58. Buyer Price Determinants
    • What capital/loan capacity do you have?
    • How would you improve the business’s value?
    • What must be present to extract value from the business?
  • 59. Federal Tax Rules
    • Effects depend on business form (sole proprietor, partnership, Sub S/Sub C corporation)
    • General rule : Each asset is sold when the business is sold, with appropriate tax results
  • 60. No Tax Due?
    • Tax-free corporate reorganization
    • Liquidation of a subsidiary, where parent keeps ownership of assets
    • Proprietor sells his/her business for stock in remaining business
    • Purchase of stock in a corporation
    • Purchase of partnership interest, where no §754 election (for gain from basis) in effect
    • Transfer on death of the owner
    • Transfer of interests by gift
  • 61. Sec. 1060 Rules
    • Price is allocated first to cash,
    • Then A/R
    • Then to other assets by FMV
    • Only thereafter to goodwill
    • Reporting is required: Form 8594
  • 62. Allocation by Asset Class
    • Capital assets : LT if held over one year, include securities, land, goodwill: losses deductable
    • Ordinary Income assets: A/P, A/R, depreciation recapture, pyts. under cov. not to compete .
    • §1231 assets: depreciable and real property held more than 1 yr., get capital gains treatment on net gain/loss
    • Installment sale rules for cash (not accrual) basis taxpayers
  • 63. Buyer vs. Seller Rules
    • Allocations are different for Buyer and Seller:
    • Buyer allocates cost of acquisition to basis of the asset (sale price plus transaction costs)
    • Seller allocates amount realized on sale to gain from the sale of the asset (sale price less transaction costs)
  • 64. Buyer Allocation Objective
    • Objective: Allow rapid writeoff of purchase price
    • Maximize goodwill, noncompete payments, amortize over 15 years
    • Minimize buildings : amortize over 27.5 or 39 years
  • 65. Seller Allocation Goals
    • Covenants not to compete are ordinary income for sellers.
    • Goodwill payments are capital gains (lower tax)
  • 66. Compromise Allocation
    • Seller could have a consulting agreement:
    • Buyers get immediate deduction, prefer payments early in agreement
    • Sellers realize ordinary income instead of capital gains, but can space income over time
    • IRS scrutinizes economic reality of seller functions after sale
  • 67. Earn-Out Limits
    • IRS Installment Sale Rules: Only cash basis taxpayers, and companies therefore must have less than $1 million in assets
    • SBA Loan rules may limit duration of allowable earn-outs to one year
  • 68. 15 Year Amortization
    • IRC Section 197 allows this for :
    • Goodwill
    • Going-Concern Value
    • Workforce In Place
    • Information Base
    • Customer relationships
    • Supplier relationships
    • Licenses, permits
    • Covenants not to compete (if from purchase)
    • Franchises, trade names, trademarks
  • 69. No Sec. 197 Rules For
    • Financial Interests
    • Land
    • Computer software not modified for the company sold or bought
    • This means purchaser doesn’t have to amortize over 15 years or more: can expense immediately
  • 70. Tax Reduction Methods
    • Operate as a pass-through entity: no double tax on liquidation
    • Covenants not to compete with individuals, not company: ordinary income to covenanter, no corporate tax
    • Personal goodwill of seller who consults: capital asset, not ordinary income
    • Tax-free reorganization methods
  • 71. C Corporation Issues
    • Asset sale: C corporation not liquidated after sale of its assets has tax only at entity level, not individual, buyer may not get liabilities
    • Stock sale: buyer gets liabilities and historical basis of assets
  • 72. Pass-Through Entities
    • Liquidation gain may be realized on conversion
    • Conversion to Sub S: built-in gains taxed if Sub S sold within 10 years of conversion
    • Like-kind conversion not liquidation
    • Entities can run in parallel, so seller keeps entity, just sells this business as one of its assets (but note 50% or more value disguised sale rule)
  • 73. Stock Sale?
    • Sellers Prefer This:
    • Depreciation recapture if assets sold
    • Liabilities stay with seller if assets sold
    • Stock sale, though, is easier and allows installment sale, if seller is cash basis taxpayer
    • Choice affects price buyer will pay
  • 74. Tax Cut Methods
    • Operate as a pass-through entity: no double tax on liquidation
    • Covenants not to compete with individuals, not company: ordinary income to covenanter, no corporate tax
    • Personal goodwill of seller who consults: capital asset, not ordinary income
    • Tax-free reorganization methods
  • 75. Sale Checklist
    • Seller prefers stock sale
    • Seller prefers cash deal, unless can get installment sale
    • Buyer prefers asset purchase
    • Buyer prefers earn-out
    • Buyer has major due diligence Q
  • 76. A Final Thought
    • This is not a zero sum game. If both parties are not satisfied, prepare to pay lawyers, instead of yourselves.
  • 77. Part Four
    • Disability, Retirement, and Estate Plans
  • 78. Disability
    • One out of every five or six adults disabled for six months or more during their working lifetime
    • Insurance is one option for coverage
    • Spouse or partner business continuation is another
    • Note particular dangers for lawyers: depression and divorce
  • 79. Disability Insurance
    • Not a government program: be prepared for regular proof you are still disabled
    • Premium amounts keyed to waiting period, income replaced and probability of disability trigger (age, health)
    • Example: AICPA LTD Ins. 50-69, $4k/month, 26 week wait: $384 semiannual premium
  • 80. Retirement Plans
    • My plan: per cousin Bill Alexander: worked until 93, went to the office his last day. Ditto (though at a younger age), for my lawyer great-uncles.
    • You could do better. Many sites provide suggested savings/month for target income; many methods (401(k), SEP, IRA, etc...) to defer taxes on savings; many vendors offer investment/retirement advice.
  • 81. Estate Planning
    • 2010 is an estate tax holiday, BUT:
    • Tax comes back in 2011, and
    • Gift tax may apply over $1 million given, and
    • No stepped-up basis in new tax rules, so original owner’s cost to acquire determines recipient income tax on capital gain when an asset is sold
  • 82. Estate Tax Planning
    • The basic method: Use as many techniques as needed to bring gift/estate tax to acceptable level, minimize income taxes on asset sales
  • 83. Family LLC or LP
    • Annual gift exclusion from income tax $13k 2009 and 2010; $1 million/person/lifetime gift tax exclusion
    • FLLC allows:
    • Minority interest/marketability discounted gifts of non-control interest class interests
    • K-1 income to low bracket taxpayers
  • 84. GRAT
    • Grantor Retained Annuity Trust
    • Grantor retains an interest: gets an annuity for a period of years, only transfer to be taxed is the remainder interest in the assets supporting the annuity (IRC 7520), and if grantor survives period, trust assets not in grantor estate
  • 85. SCIN
    • Self Cancelling Note:
    • Business is sold (usually to family members who carry same on in next generation) with periodic installment payments, but note cancelled as of seller’s death: may be taxed as annuity, but interest part deductible to business, and stepped up basis for asset on seller’s death
  • 86. IDGT
    • Intentionally Defective Grantor Trust
    • Combines with SCIN: Income/Taxable gains reportable by grantor during lifetime, are additional non-taxable gifts to beneficiaries. Debt on death of grantor is in grantor’s estate, transfer of business assets is not. Appreciation in business assets after trust also not in estate.
  • 87. Other Common Tools
    • Generation-skipping trust structured to use $3.5 million/person GST tax exclusion
    • Minor’s trusts/Crumney Trusts: Gift to same LLC non-control interest allows income to minor without much lost to grantor if minor withdraws at 21
    • Unlimited Marital Deduction: Spouse can receive all, with no income/estate tax
  • 88. Estate Plan Questions
    • Can the family member who will own the company run the company? What else will he/she demand to work for the passives?
    • Is there another income source for death, retirement, or disability income to the planned beneficiary?
    • How long do you need to allow annuity arrangements to run within the expected lifetime of the owner?
    • Is the plan and entity structure income (esp. capital gains), estate, and gift-tax minimizing?
  • 89. Tax Changes Coming
    • IRC May Eliminate Minority/Marketability Discounts On Gifts To Family Members: Note continued control still makes FLLC/FLP helpful
    • SCIN could lack “economic substance”:
    • Means charitable remainder trusts or other means to eliminate stepped-up basis needed
  • 90. Special Guest
    • Value Maximization Before Sale
    • Value Maximization On Sale
    • Valuation Methods
    • Joseph McCaul, Joseph Associates International
  • 91. Special Guest
    • Retirement and Estate Plan Assistance Options and Methods: John Searer, JP Morgan Chase

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