Don’t Forget About The Business: How Company Ownership Can Trigger Estate Tax
By Joe Busnengo, Attorney At Law
A while ago, I was having a conversation with a couple in the early stages of estate planning and as I often do, I asked them about their net worth. It’s one of my standard questions so that I have a better understanding of how much we may need to worry about taxes.
Their answer? Possibly as much as $1 million.
Since these numbers aren’t particularly close to the threshold at which the estate tax would take effect ($4 million for the state of Illinois, $11.2 million for federal), the couple probably wouldn’t have to worry about that, right? Not so fast.
Later in our conversation, I learned that they owned a business. How much was that worth? While they couldn’t put an exact number on the business’ value in that moment, there was a good chance that their family-owned business might be worth several million dollars. Suddenly, where we once thought that tipping over the threshold to trigger the estate tax was an outside possibility, it became much more realistic – especially considering the $4 million estate tax threshold in Illinois – when the value of a company was added in.
Consider if we’d drafted the estate plan for this couple without knowledge of the business they owned. We might have been dealing with quite the unexpected tax bill after they passed away. Now that we know such a business exists, we have a solid sense of the company’s value while taking inflation or growth into account as we move forward with estate planning.
The moral of the story: You can’t forget about the ownership of a business when factoring in all the assets that might influence whether or not you pay estate tax. If these factors do come into play to cause you concern about your exposure to the estate tax, there are several strategies we can employ to reduce or eliminate estate tax liability.
No matter what path we ultimately follow together, don’t wait to take a full inventory of your assets with the help of our estate planning attorneys at Miles & Gurney, LLC. The sooner we have a planning conversation, the less likely there will be a host of surprises that await your family down the road. Call us today at 312.929.0974.
Joe Busnengo practices in the areas of probate, family law, and estate planning. While a student at Northwestern University School of Law, he gained experience with family law as an extern at Chicago Volunteer Legal Services and with probate and estate planning as a clerk at Prather Ebner LLP. Since graduating and being admitted to the bar in 2013, he has represented clients in adoption, divorce, and estate planning matters through Chicago Volunteer Legal Services and Wills for Heroes. He is currently a member of the Chicago and Illinois State Bar Associations and serves as co-chair of the CBA YLS Public Outreach—Wills for Heroes subcommittee.