How Can Financial Advisors Help Minimize Estate Taxes for Business Owners?

Our iWealth Financial Advisors can help business owners minimize estate taxes. While each of our clients’ situations are unique, iWealth Advisors often work through several effective strategies:

Leveraging Tax Exemptions

Financial advisors guide business owners in utilizing the lifetime gift tax exemption. As of 2024, the combined federal estate and gift tax exemption is $13.61 million per person or $27.22 million for married couples. By strategically gifting business interests during their lifetime, owners can potentially reduce the overall value of their taxable estate.

Establishing Trusts

Advisors recommend various trust structures to minimize estate taxes:

• Spousal Lifetime Access Trusts (SLATs): Allow large gifts to be made while taking advantage of the gift tax exemption without resulting in later estate tax inclusion.
• Intentionally Defective Grantor Trusts (IDGTs): Remove future business appreciation from the owner’s estate while allowing the grantor to pay income tax on trust earnings, effectively making tax-free gifts to beneficiaries.
• Irrevocable Life Insurance Trusts (ILITs): Exclude life insurance proceeds from the deceased’s estate value.
• Grantor Retained Annuity Trusts (GRATs) or Grantor Retained Unitrusts (GRUTs): Enable transfer of assets into a trust while receiving payments, ultimately distributing remaining assets to beneficiaries with reduced gift and estate taxes.

Valuation Discounts

Financial advisors work with specialists to apply appropriate valuation discounts to privately held businesses, potentially reducing the taxable value of the business for estate tax purposes.

Family Limited Partnerships (FLPs)

Advisors may recommend setting up FLPs to transfer ownership at a reduced value for tax purposes, helping to lower the overall estate tax burden.

Annual Gifting Strategies

Financial advisors can help implement annual gifting strategies, such as transferring portions of business interests to family members over time, potentially reducing the owner’s net worth and potential estate tax liability.

Business Structure Optimization

Advisors may suggest creating Limited Liability Companies (LLCs) or other business structures to minimize state estate taxes, depending on the owner’s state of residence.

By employing these strategies, our iWealth Financial Advisors help business owners preserve more of their wealth for future generations while ensuring compliance with tax laws and regulations. If you have questions, please call (507)835-9111 or email info@iwealth4me.com to schedule an appointment with one of our iWealth Financial Advisors.

Disclosures
LPL Financial representatives offer access to Trust Services through The Private Trust Company N.A. an affiliate of LPL Financial. (154-LPL)

Limited partnerships are subject to special risks, such as potential illiquidity, and may not be suitable for all investors. (140-LPL)