Asset Protection and Estate Taxes for Business Owners

02 Mar

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Asset Protection and Estate Taxes for Business Owners

Most Mid-Size Businesses Owners Needlessly Pay Huge Estate Taxes & Unnecessarily Expose Business & Personal Assets to Creditors.

Business Owners seem to be relatively savvy in reducing income taxes however, we rarely see owners implement effective estate plans or prudently protect personal and business assets. Unfortunately less than 1 out of 5 business owners we speak with have an appropriate succession or estate plan, and most of these owners will lose 50% or more of the value of their business if the plan is not amended. Additionally, most business owners leave their personal assets exposed to business creditors. Perhaps even worse is that most are not even aware that they can lose their personal assets to any number of potential creditors.

For Business Owners Preparing for a Sale
The Potential to Materially Reduce or Eliminate
Taxes can be Quite Substantial and Time Sensitive.

The Interview – Asset Protection & Estate Tax
We have interviewed dozens of Business Owners regarding their estate plans. Of those Owners that do have a plan the most frequent set of responses are:

LockeBridge: What kind of trust do you have?
Bus. Owner: I’m not sure.

LockeBridge: There are many different types of trusts. Can you call your lawyer to find out what you have!
Bus. Owner: My lawyer tells me that I have a revocable trust that will protect me.

LockeBridge: Did you know that currently your revocable trust will only shelter $5.45M from federal estate taxes for each of you and your wife and there is a good change that you will have to pay state and federal estate taxes of more than 50% of your net worth.
Bus. Owner: Are you kidding! I expect my Company to grow significantly so the taxes are going to be huge. Why didn’t my lawyer tell me about this?

LockeBridge: Well, did your estate attorney speak with you about the eventual disposition of your Company.
Bus. Owner: No, when I was speaking with him I was not considering the sale of my Company. Now that I have decided to sell it these issues are more tangible to me

LockeBridge: I assume that your also not aware that you can also shelter substantially more of your Company from estate taxes by valuing the Company utilizing an IRS acceptable Lack of Marketability and/or a Minority Interest Discount prior to gifting or selling it to a irrevocable trust. I would be happy to illustrate for you how much you can save by doing this. I would also be happy to refer you to another estate attorney.

If you are contemplating the sale of your business
in the foreseeable future, it is even more important to act now

or you will most likely lose much of the opportunity to reduce estate taxes.

More Than Estate Tax Protection – Protection From Creditors
In addition to estate taxes a proper trust vehicle can keep both the business owner’s personal and business assets safe from creditors such as:

  • Divorcees
  • Tax Collectors
  • Accident victims
  • Health-care providers
  • Credit card issuers
  • Business creditors

Select Client Experience – Estate Planning and Asset Protection

“LockeBridge gained a clear understanding of our objectives which went well beyond the transaction itself. They gave us invaluable guidance on estate planning and wealth management. This was a part of the process we had given very little thought to but turned out to be a very important step in completing the deal and preserving our wealth”

Joe Montesano
President and CEO – Something Sweet, Inc.

“Not only did LockeBridge structure a very favorable deal and manage all the steps to closing, they provided services far beyond the transactional requirements focusing on the personal interests, tax minimization, and wealth creation of the owners. Winning Proposals was actually a subsidiary holding of a pension fund with multiple layers. The objective was to create a transfer that would result in deferring materially all taxes while at the same time meeting the Owners’ post-closing income needs.”

David Claiborne
President -Winning Proposals, Inc.

“LockeBridge gave us invaluable advice on how to both minimize and defer the taxes which resulted from the transaction. Because the buyer was a foreign public company, on the Stockholm exchange, the financial considerations were even more complex. In the end we made a very favorable transaction and protected our assets from creditors which were exposed to certain potentially adverse foreign policies.”

Matthew Nekoroski
President -Surgical Tables, Inc.

* LockeBridge advises its clients on strategies to minimize estate and income taxes. When appropriate LockeBridge refers its clients to attorneys and accountants which are pre-approved via an arduous screening process which seeks both excellence in performance and uncompromising client commitment. LockeBridge does not charge retainers and we do not accept compromising referral fees. Mission Statement / No Conflict of Interest.