There are many reasons most everyone in Arkansas should have estate planning as a top priority. For one, it provides important clarity and peace of mind that the welfare of your loved ones has been addressed in the event of your dying. Another is that a well-crafted estate plan, assembled under the hand of a skilled attorney, can protect assets and reduce potential tax liability.
Which tools should be used depends on an individual’s circumstances. Sometimes, it’s important to be aware of how the winds may be shifting in terms of tax policy. Government may decide to close a loophole that has long provided a tax reduction benefit. Fortunately, such changes don’t happen overnight and that makes it possible to take action in anticipation of proposed adjustments. One such wind change appears to be in the offing.
The U.S. Treasury Department recently announced changes to the way it will levy some gift and estate taxes going forward. The rules are only in the proposal stage at this point. If they are implemented, they won’t become final until sometime next year.
The focus of the change is on the strategy that some wealthy owners of closely held family businesses have used for years. Under existing rules, it is possible to create Family Limited Partnerships through which assets can be distributed to participating beneficiaries.
According to Treasury officials, many who have used the practice have understated the fair market value of the assets transferred in order to reduce their tax obligations. Officials say the proposed changes will stop the practice and ensure tax fairness.
In advance of the change, many estate planning and financial advisors are recommending that those with shares in closely held family businesses consider reviewing their structures. They also suggest that anyone who has considered creating a Family Limited Partnership for their business act now, while the current rules are still in place.
Source: investopedia.com, “Treasury Looks to Close Family Business Estate Tax Loophole,” Mark P. Cussen, Aug. 11, 2016