Business owners in Washington, DC often want to pass on their businesses to family when they pass away. Estate planning can help accomplish that while preserving as many business assets as possible and help ensure a smooth transition. Otherwise, creditors and taxing authorities may end up with a significant portion of those assets, and the company's operations could be interrupted and cause further losses.
Some Washington, DC residents may be at a point where they no longer rely on the income from the business. In this case, passing it on as a gift could be a viable solution. Doing so could avoid the necessity of paying gift taxes on a portion -- or in some cases all -- of the assets. If the company will not be taken over by chosen family members until the death of the owner, taxes may be deferred if certain criteria are met.
Other ways to pass on the family business are by using self-cancelling promissory notes or buy-sell agreements. Some families use what is called a Grantor Annuity Trust (GRAT) or form a Family Limited Partnership (FLP). These types of agreements allow the owner to maintain some or complete control of the business during life and receive income from it. Once the individual dies, the business passes to family members.
Choosing from these options can be confusing. Consulting with someone who understands the complexities in estate planning for business owners could help. Once it is clear what an individual's wishes are concerning passing on the family business, options to achieve those goals can be explored. After that, the appropriate documents can be drafted and executed.
Source: desmoinesregister.com, "Transferring a business to your children", Frank Mokosak, Jan. 28, 2015