Passing On A Business To Heirs
An individual who owns a business or a share of a business may face unique challenges when it comes to transferring their share of an enterprise to an heir or a set of heirs. That’s why it is essential for a proprietor or a shareholder, member or partner in a corporation, limited liability company, or in a partnership to retain the services of a reputable, experienced probate and business estate planning law firm—one like Hale Ball Carlson Baumgartner Murphy, PLC of northern Virginia. Whatever your estate planning goals are with respect to your business, our team of experienced lawyers will develop a plan to either transfer or sell your business at the appropriate time. To discuss the various options with one of our probate and estate planning lawyers, contact our northern Virginia law office.
How the Estate Tax Affects Businesses in the Commonwealth of Virginia
Many successful business owners in Virginia have a net worth that exceeds the federal estate tax exemption. The estate is taxed on any amount that exceeds that exemption—$11.58 million in 2020 (and slated to return to $5 million, adjusted for inflation, in 2026). In many cases, the heir receiving the business doesn’t have the liquidity to pay the excessive taxes on it. This forces the heir to have to sell a portion or all of the business to meet the tax liability.
Consider the owner of a successful medium-sized sole proprietorship in Alexandria, VA that is valued at the time of the decedent’s death at $25 million. The owner decides to pass full ownership to his daughter. Using today’s (2020) exemption and estate tax rate, everything above $11.58 million would be taxed ($13.42 million) at 40% (additional assets owned at death outside of the business would be subject to additional tax). That means that the daughter must pay the IRS $5.4 million. If the business has millions of dollars in reserve cash, this might not be a problem, but most businesses of this size would not have that amount of liquidity. The daughter may be forced to sell the business concern, take on debt, seek new investors, or downsize the company. Any of these scenarios may be counter to the wishes of the owner. There are, however, solutions to help your heirs avoid this scenario.
Professional Estate Planners for Businesses in Northern Virginia
The estate planning attorneys of Hale Ball Carlson Baumgartner Murphy, PLC develop innovative plans that allow companies to remain intact after the deaths of partners and owners. We advise individual proprietors as well as the owners of partnerships, limited liability companies, and closely held corporations. To schedule an appointment to discuss the needs of your business and your personal estate, contact our Fairfax office at 1-703-591-4900.
Since 1980 the AV-rated law firm of Hale Ball has served the legal needs of individuals and businesses. Our team of attorneys include lawyers named to Super Lawyer and Rising Star lists, as well as attorneys with advanced legal degrees, specialty certifications and lawyers who teach their areas of practice to other lawyers.
Use the contact form on this page to schedule a consultation, or call 703-591-4900.
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