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Using trusts to get the most from business assets

On Behalf of | Oct 5, 2017 | Estate Taxes

Georgia residents might like to know about legitimate ways to minimize or eliminate gift and estate taxes. Those who own a successful business may wish to freeze the value of a company to avoid taxes due to future appreciation of the company.

This strategy to reduce estate and gift taxes could save millions for some families when planning to eventually sell a business, but this must be done right. Owners must establish a trust and can then gift discounted company stock to the trust and sell discounted company stock to the trust. The stocks also qualify for a minority interest and marketability discount, so the amount in the trust is valued at more than what is put in.

If the business grows over time, this produces more money in the trust for the owner’s family. A larger amount could be acquired by the time the company is sold. The original investment put in the trust is not part of the owner’s estate because it is owned by the trust instead. This means it is not subject to estate tax.

Trusts are a useful tool for estate planning because they could help grantors leave behind a larger legacy for heirs. Trusts often have tax benefits and are not subject to probate like wills. They are also typically more private than wills. However, they are in some cases costly to establish and administer. For these and other reasons, people who are considering this type of estate planning tool might want to meet with an attorney and discuss the applicable rules and regulations.