Now Is An Excellent Time For Business Succession Planning
Posted by Robert Louis on 18 Jan 2009 | Tagged as: Family Business
In the midst of disturbing news about the economy, there are opportunities now available that make succession planning for businesses work well. There are two reasons: lower values for businesses and historically low IRS interest rates used in planning for wealth transfers.
It’s no secret that the economic downturn has reduced the value of many businesses. For those businesses that are well-run, it’s likely that this will be only a temporary drop, and that as the economy recovers, values should increase again. That means that this is a good time to transfer assets at the lowest gift tax cost.
In addition, the interest rates used by the IRS in determining the value of split-interest and deferred gifts is now at its lowest point ever, 2.0% for gifts made in February 2009. If a gift is made in the form of a grantor retained annuity trust, which allows a business owner to transfer ownership but defer the date when the transfer is completed, more can be transferred when the IRS rates are lower.
Succession planning is a complicated process, but the benefits of doing it correctly and at the right time are great. Now is the time to think about that kind of planning.