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Estate tax implications for small businesses

Your entrepreneurial pursuits in Miami have hopefully yielded a significant windfall for you and your family, and provided people in the local community with jobs. Yet what happens to your business after you are gone? If you have earned significant personal assets, your estate could be subject to the federal estate tax. Many small business owners in your same position come to us here at The Law Offices of Frye and Vazquez, P.L. concerned that their having to pay the estate tax will force the sale of their companies. Should you be sharing this same concern?

According to the Center on Budget and Policy Priorities, the answer that question is no. It recently shared information that showed that of the 5,200 estates that owe taxes in 2017, only 50 of those are small businesses or farms. That is because the total taxable estates of their owners does not exceed the estate tax threshold ($5.49 million for 2017). If this is the case with your company, you can simply transfer ownership to your beneficiaries without having to worry about a stiff tax penalty.

Even in the cases where you individually may owe the estate tax, there are ways to ensure that your tax liability does not lead to the end of your small business. The easiest way to do this is to designate liquid assets to pay off your taxes as part of your estate. This ensures that you do not have to touch your business holdings to do so. If you do not have sufficient personal assets to do this, you can instruct your personal representative or your beneficiaries to have your estate tax liability spread out over 15 years, thus lessening their personal financial hardship.

More information on planning for estate taxes can be found here on our site.

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