Transferring Your Family Business, Part II

In my last column I introduced some of the more common strategies for minimizing taxes when transferring your family business. Below are a few more to consider, but remember, none are without drawbacks. You’ll want to consult a tax professional as well as your estate planning attorney to explore all strategies.[emember_protected custom_msg=”Click here and register now to read the rest of the article!”]

Transferring Your Business with a Buy-Sell Agreement

A buy-sell agreement is a legal contract that prearranges the sale of your business interest between you and a willing buyer. A buy-sell agreement lets you keep control of your interest until the occurrence of an event that the agreement specifies, such as your retirement, disability, or death.

Grantor Retained Annuity Trusts or Grantor Retained Unitrusts

A more sophisticated business succession tool in a grantor retained annuity trust (GRAT) or a grantor retained unitrust (GRUT). GRAT/GRUTs are irrevocable trusts to which you transfer appreciating assets while retaining an annuity or unitrust payment for a set period of time. In general, an annuity means you receive fixed periodic payments, while a unitrust means your receive payments of a fixed percentage of trust assets (revalued annually).

Private Annuities

A private annuity is the sale of property in exchange for a promise to make payments to you for the rest of your life.

Self-Canceling Installment Notes

A self-canceling installment note (SCIN) allows you to transfer the business to the buyer in exchange for the promissory note.

Family Limited Partnerships

A family limited partnership can also assist in transferring your business interest to family members. First, you establish a partnership with both general and limited partnership interests. Then, you transfer the business to this partnership.
As federal and state tax rules are subject to frequent changes, you should consult with a qualified tax advisor prior to making any investment decision.
Raymond James & Associates, Inc. member New York Stock Exchange/SIPC
BIO: Brad Dantzler is a trusted financial advisor with over 18 years of experience. He is active in his church and community, has been an active President’s Club member for six years, and is currently president of the Winter Haven Library Board as well as a Winter Haven city commissioner. [/emember_protected]

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