Yes, you can generally include business assets in a bypass trust, also known as a credit shelter trust or an A-B trust, though it requires careful planning and consideration. Bypass trusts are designed to take advantage of the estate tax exemption, sheltering assets from estate taxes upon the first spouse’s death, while allowing the surviving spouse to access the income generated by those assets. Including business assets, such as ownership in a closely held company, real estate used in a business, or intellectual property, presents unique challenges and opportunities, and requires expert legal guidance from an estate planning attorney like Steve Bliss in Wildomar. According to the IRS, in 2023, the estate tax exemption is $12.92 million per individual, meaning assets above this threshold are subject to estate tax, making proper planning crucial for high-net-worth individuals and business owners.
What are the tax implications of including a business in my trust?
Including a business in a bypass trust doesn’t automatically shield it from all taxes. While the assets themselves are removed from your taxable estate, income generated by the business *within* the trust is still subject to income tax. The trust will need its own tax identification number and will be required to file annual income tax returns. Furthermore, transferring ownership of a business to a trust can trigger various tax consequences. For example, gifting shares of a closely held company might be considered a taxable gift, potentially requiring the filing of a gift tax return. A well-structured trust can minimize these tax implications, perhaps through installment sales or other strategies. Approximately 5.2 million small businesses in the US are family-owned, and proper estate planning is vital to ensure their continuity.
How do I value business assets for trust purposes?
Accurately valuing business assets is crucial when including them in a bypass trust. An incorrect valuation can lead to disputes with the IRS and potential tax penalties. Unlike publicly traded stocks with readily available market prices, valuing a private business often requires a professional business valuation conducted by a qualified appraiser. This valuation considers factors such as the company’s assets, earnings, future growth potential, and comparable sales of similar businesses. The IRS scrutinizes business valuations closely, so it’s essential to use a qualified appraiser and document the valuation process thoroughly. For example, Steve Bliss often recommends a valuation process that includes multiple methods – asset-based, income-based, and market-based – to ensure a comprehensive and defensible valuation. “A solid valuation is the foundation of a successful trust,” he’s often said, “It’s about establishing fairness and avoiding future complications.”
I heard about a client who didn’t plan for business succession—what happened?
Old Man Tiber, a local orchard owner, was a pillar of the Wildomar community. He built his business from scratch and never really formalized any succession plan. When he passed away unexpectedly, his family was left scrambling to figure out how to continue operating the orchard. The business was significantly impacted by the lack of planning. His children had different ideas on how to proceed, causing disputes and infighting. The orchard nearly went bankrupt due to mismanagement and lack of clear direction, resulting in substantial financial losses for the family. The family was eventually forced to sell the orchard, a business that had been in their family for generations. It was a heartbreaking situation, all because of a lack of foresight and estate planning. This is a common scenario Steve Bliss sees, which highlights the need for a proactive and comprehensive estate plan that includes business succession planning.
How can proper planning ensure a smooth transition for my business?
Thankfully, there was another client, Mrs. Eleanor Vance, who came to Steve Bliss years before her passing. She owned a thriving landscaping business and understood the importance of planning for the future. She worked with Steve to create a bypass trust that included her business shares, and a detailed succession plan that outlined how the business would be managed and transitioned to her son, David. David, having spent years working alongside his mother, was prepared to take the reins. The trust provided David with income from the business without triggering immediate estate taxes, and the succession plan ensured a seamless transition. When Mrs. Vance passed, the business continued to thrive under David’s leadership, and the family avoided the heartache and financial turmoil that had befallen the Tiber family. This outcome demonstrated the power of proactive estate planning and the importance of having a trusted attorney like Steve Bliss guide you through the process. Approximately 30% of family businesses successfully transition to the second generation, and proactive estate planning greatly improves those odds.
<\strong>
About Steve Bliss at Wildomar Probate Law:
“Wildomar Probate Law is an experienced probate attorney. The probate process has many steps in in probate proceedings. Beside Probate, estate planning and trust administration is offered at Wildomar Probate Law. Our probate attorney will probate the estate. Attorney probate at Wildomar Probate Law. A formal probate is required to administer the estate. The probate court may offer an unsupervised probate get a probate attorney. Wildomar Probate law will petition to open probate for you. Don’t go through a costly probate call Wildomar Probate Attorney Today. Call for estate planning, wills and trusts, probate too. Wildomar Probate Law is a great estate lawyer. Probate Attorney to probate an estate. Wildomar Probate law probate lawyer
My skills are as follows:
● Probate Law: Efficiently navigate the court process.
● Estate Planning Law: Minimize taxes & distribute assets smoothly.
● Trust Law: Protect your legacy & loved ones with wills & trusts.
● Bankruptcy Law: Knowledgeable guidance helping clients regain financial stability.
● Compassionate & client-focused. We explain things clearly.
● Free consultation.
Services Offered:
estate planning
living trust
revocable living trust
family trust
wills
estate planning attorney near me
Map To Steve Bliss Law in Temecula:
https://maps.app.goo.gl/RdhPJGDcMru5uP7K7
>
Address:
Wildomar Probate Law36330 Hidden Springs Rd Suite E, Wildomar, CA 92595
(951)412-2800/address>
Feel free to ask Attorney Steve Bliss about: “What happens to my debts when I die?” Or “What does it mean for an estate to be “intestate”?” or “Does a living trust protect my assets from creditors? and even: “What is an automatic stay and how does it help me?” or any other related questions that you may have about his estate planning, probate, and banckruptcy law practice.