Estate Planning Business Valuations
Maximize tax benefits and facilitate wealth transfer with strategic business valuations. Learn about valuation discounts, timing strategies, and compliance requirements for estate and gift tax planning.
Common Estate Planning Valuation Purposes
Annual exclusion gifts, lifetime exemption planning, and charitable giving strategies requiring current fair market value.
Date-of-death valuations for federal and state estate tax returns, including alternate valuation date elections.
Establishing values for succession planning and ensuring agreements meet IRS requirements for estate tax purposes. Funded with life insurance - coordination with insurance professionals recommended.
Key Valuation Discounts for Estate Planning
Reflects lack of control over business decisions:
- • Illustrative range: 10-40%. Actual discounts must be supported by specific facts and circumstances.
- • Higher in family-controlled businesses
- • Consider voting vs. non-voting interests
- • Document control restrictions carefully
Reflects lack of ready market for interests:
- • Illustrative range: 15-50%
- • Consider transfer restrictions
- • Family attribution rules
- • Right of first refusal provisions
When business success depends heavily on the owner/transferor, additional discounts may apply for estate planning purposes. This is particularly relevant for professional practices and owner-operated businesses.
Important: Discount ranges shown are for educational purposes only. IRS scrutinizes aggressive discounts. Each discount must be professionally determined and documented.
Strategic Timing Considerations
Important: Timing strategies should be coordinated with tax and legal advisors.
Before Value Increases
- • Pre-IPO or sale preparations
- • Before major contracts awarded
- • During economic downturns
- • Early in business lifecycle
Consider Business Cycles
- • Seasonal earnings patterns
- • Industry cyclical trends
- • Temporary earnings decreases
- • Restructuring or transition periods
Important: The following are valuation timing considerations. Tax strategies should be developed with qualified tax advisors.
Annual Exclusion Gifts
Valuations may be needed annually
Grantor Retained Annuity Trusts
Valuation critical at funding
Sales to Intentionally Defective Grantor Trusts
Fair market value determination required
Note: Consult with tax counsel regarding structure and tax implications.
IRS Compliance & Documentation
- Complete appraisal report by qualified appraiser meeting IRS requirements under IRC §170(f)(11) and Reg. §1.170A-13
- Form 709 (Gift Tax Return) filing requirements
- Supporting financial statements and documents
- Corporate records and ownership documentation
- Excessive valuation discounts
- Inadequate appraisal methodology
- Lack of business purpose for transfers
- Family attribution and control issues
- Valuation date discrepancies
Best Practices for Estate Planning Attorneys
• Obtain baseline valuation early
• Document business purpose for transfers
• Consider recapitalizations to create minority interests
• Plan for multi-year gifting strategies
• Choose credentialed appraisers (ASA, ABV, CVA)
• Verify experience with estate/gift work
• Ensure independence from client
• Review prior IRS examination history
• Confirm appraiser meets IRS qualified appraiser requirements
• Verify no prohibited financial interests
• Maintain comprehensive gift records
• Document restrictions and their purposes
• File protective elections when appropriate
• Consider adequate disclosure requirements
Fee Structure Transparency
• IRS-compliant valuation report
• Supporting documentation
• One consultation with counsel
• Amended valuations for changed circumstances
• IRS examination support
• Multiple entity valuations
• Annual update valuations
• IRS audit support and testimony billed separately
IRS Qualified Appraiser Requirements
Expert Business Valuations for Estate Planning
Maximize tax benefits and ensure IRS compliance with professional business valuations. Work with a credentialed appraiser experienced in estate and gift tax planning strategies.
Ready to Move from Learning to Action?
Put your knowledge to work with professional business valuation services tailored to your specific needs.