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A business estate plan is a blueprint of what will happen to your company if you should pass away or become disabled and unable to run it. For example, it involves conducting a business appraisal to value the company and its assets. In addition, you should create a will in accordance with Texas law that disburses your ownership shares and then take steps to insure your life and those of your partners. Here are a few steps to creating an effective business estate plan.

3 Estate Planning Tips for Business Owners

1. Minimize Inheritance Taxes

As of 2022, federal estate tax applies to estates of $12.06 million and above. It ranges from 18% to 40%, depending on the size of the estate. While some states have additional inheritance taxes, Texas is not one of them. However, many businesses do not have enough liquid assets to cover the taxes, so the company must often be sold. Some business owners split ownership and assets between family members or into multiple trusts so that each owns less than $12.06 million, in case someone should die unexpectedly. Creating a limited partnership can also help. Since the partners in it, such as your family, would already co-own the estate assets, the estate would not transfer upon your death and no estate tax would be required. 

2. Schedule a Business Appraisal 

business appraisal

The IRS requires an appraisal of stock, partnership units, and other business interests to support the values your heirs claim on their estate tax returns in case of an audit. However, having this done in advance usually wards off most audits. The appraiser's financial expertise can also help your attorney maximize your tax benefits, and this can act as a benchmark with which to measure later business growth or a decline in value.

3. Buy Partner Insurance

As with unexpected taxes, many businesses don't have enough cash on hand to buy out a partner's shares if they should pass away suddenly. "Partner life insurance" pays out a death benefit that covers the value of those shares, so the partner can purchase the heirs' shares outright, the business does not have to be sold, and the surviving partner is not faced with new partners who may know nothing about, or have little interest in, the company. 

 

If you seek a business appraisal to help you make effective estate planning decisions, contact Certified Appraisers Inc. in Houston, TX. They are family-owned and -operated and have served the Houston metro area since 1974. They specialize in commercial building and equipment appraisals and can advise you about buying or selling a business. Their guidance will help you make difficult disposition decisions with regard to your company to ensure it goes to the right people when you are no longer around. Learn more about them on their website or call (713) 680-3290 to schedule a business appraisal.

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