Michigan Estate Planning Blog

The Aftermath Of Selling The Business

Selling your business is no easy task, nor is it a quick one. At some point an agreement is presented and, if accepted, the changes can happen as fast as the pen can sign. Nevertheless, in the aftermath of the sale any deal can turn acrimonious. If you and your family are considering the sale of the family business, and maybe considering an actual offer on the table, there is some business thinking that should enter the mix. This is especially true when it is your exit from the business. Consider the warning alarm sounded by Forbes in a recent article titled “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin.” It is in the interests of most sellers to make the price of the business dependent upon its future success. Consequently, there is some money upfront with a promise for full payment upon full performance. Sometimes, the idea is just to stagger full payments for the sake of financing. Plans like these can give both buyer and seller the best of both worlds, or it can mean a world of litigation when there is a disagreement or things go wrong. Remember, when planning for the sale of the family business, it really does matter just how you sell the business and it pays to be aware of the issues in advance. Read the original article for a number of common scenarios. Finally, do not forget that the family business is likely an important part of your estate, too. More often than not, the family business is your estate. If that is the case, then be mindful to structure the sale in accordance with the family needs.

Reference: Forbes (February 21, 2014) “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin”

For more information, see www.jerryreiflawyer.com

Estate Planning for the Family Farm Great Lakes Bay Region, MI

Farmers simply have to plan more than most folks. Regardless how big and industrialized modern farming has become, success or failure remains tied to the ebb and flow of the seasons, or the water patterns, or the health of the livestock. Then again, farmers also have to plan more for their own sake, too. Estate planning is simply essential to farmers and the family farm itself. Unfortunately, estate planning is too easily overlooked with all of the day-to-day work to be done. A recent article in USA Today, titled “As farmers age, planning for the future of their business grows,” explored this common problem. Land is one of those things that seldom loses value. Agriculture, by definition, requires land (and lots of it) to operate on a profitable scale these days. Consequently, modern farms find themselves racking up a potentially hefty future estate tax bill on the basis of their land values alone. Problem: When the land value represents the lion’s share of the estate value itself, then what happens when the estate tax bill comes due with only the land to pay the tab? Selling the farm would be akin to killing the goose that lays the golden eggs for the farming family. To make matters worse, the owners of family farms are getting up in years, and so time is of the essence when it comes to making plans to save these family farms. The good news is that today, unlike for much of the last half decade or so, we have fairly firm estate and gift tax laws. Therefore, farmers and their advisors can make estate plans based on more than gut and intuition. So, how do you pass on the family farm? Even more important, how will you pass it intact and who will run it after you do? These are questions that need an answer, sooner rather than later.

Reference: USA Today (May 19, 2013) “As farmers age, planning for the future of their business grows”

For more information, see www.jerryreiflawyer.com

 

Estate Planning for the Family Farm Saginaw, MI

Farmers simply have to plan more than most folks. Regardless how big and industrialized modern farming has become, success or failure remains tied to the ebb and flow of the seasons, or the water patterns, or the health of the livestock. Then again, farmers also have to plan more for their own sake, too. Estate planning is simply essential to farmers and the family farm itself. Unfortunately, estate planning is too easily overlooked with all of the day-to-day work to be done. A recent article in USA Today, titled “As farmers age, planning for the future of their business grows,” explored this common problem. Land is one of those things that seldom loses value. Agriculture, by definition, requires land (and lots of it) to operate on a profitable scale these days. Consequently, modern farms find themselves racking up a potentially hefty future estate tax bill on the basis of their land values alone. Problem: When the land value represents the lion’s share of the estate value itself, then what happens when the estate tax bill comes due with only the land to pay the tab? Selling the farm would be akin to killing the goose that lays the golden eggs for the farming family. To make matters worse, the owners of family farms are getting up in years, and so time is of the essence when it comes to making plans to save these family farms. The good news is that today, unlike for much of the last half decade or so, we have fairly firm estate and gift tax laws. Therefore, farmers and their advisors can make estate plans based on more than gut and intuition. So, how do you pass on the family farm? Even more important, how will you pass it intact and who will run it after you do? These are questions that need an answer, sooner rather than later.

Reference: USA Today (May 19, 2013) “As farmers age, planning for the future of their business grows”

For more information, see www.jerryreiflawyer.com

 

Family Farmers Should Keep a Weather Eye on the Estate Tax Exemption

The Joint Economic Committee recently released a report on the devastating power unleashed upon family farms when an estate tax is triggered. Simply titled “Estate Tax Report Released,” the committee also considered the broader impact on the economy. The report, approved by the American Farm Bureau Federation and examined in Farm Futures, notes that, while farm owners may have a great potential wealth … such wealth is tied up in land (an illiquid asset) and is not necessarily cash-in-hand. However, the IRS will hold you accountable for the estate taxes due on your land, even if you have to sell the land to pay for it. "When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings, or equipment to keep their businesses operating," said AFBF President Bob Stallman. "With 88% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax." If you (or a loved one) own a family farm, then there is no time like the present to make proper estate plans to protect and preserve the farm and the family wealth it represents. You have worked hard to make a living from your farm. Isn’t it common sense to spend some time and money protecting and preserving it?

Reference: Farm Futures (July 26, 2012) “Estate Tax Report Released”

Family Farmers Should Keep a Weather Eye on the Estate Tax Exemption

The Joint Economic Committee recently released a report on the devastating power unleashed upon family farms when an estate tax is triggered. Simply titled “Estate Tax Report Released,” the committee also considered the broader impact on the economy. The report, approved by the American Farm Bureau Federation and examined in Farm Futures, notes that, while farm owners may have a great potential wealth … such wealth is tied up in land (an illiquid asset) and is not necessarily cash-in-hand. However, the IRS will hold you accountable for the estate taxes due on your land, even if you have to sell the land to pay for it. "When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings, or equipment to keep their businesses operating," said AFBF President Bob Stallman. "With 88% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax." If you (or a loved one) own a family farm, then there is no time like the present to make proper estate plans to protect and preserve the farm and the family wealth it represents. You have worked hard to make a living from your farm. Isn’t it common sense to spend some time and money protecting and preserving it?

Reference: Farm Futures (July 26, 2012) “Estate Tax Report Released”

Family Limited Partnerships – Worth Another Look (Especially This Year)?

Sometimes managing family assets is like, well, running a business. Then again, some families actually do run their families like businesses and have enjoyed significant tax advantages by doing so through the use of the Family Limited Partnership. A recent article in The New York Times titled “In an Unusual Tax Year, the Wealthy Turn to Partnerships” explores the power of the Family Limited Partnership (FLP). Properly structured, the FLP binds the family into a business arrangement (which is not always a good thing for a family) and, in doing so, allows for the longevity of a business entity, the decreased valuation allowable to private companies, and the simple ability to pool resources for higher investments. When used correctly, there is much to be said about the FLP structure. On the other hand, there also are limitations and even outright warnings. For one, no business can safely exist without a purpose, and to form your FLP without a discernible purpose beyond avoiding estate taxes will certainly raise the ire of the IRS. Furthermore, as already intimated, it means the family must act with the swiftness and assurance of a business in their investments. Unfortunately, not all families are capable of acting like a “business.” In the end, we face an uncertain and unpromising future in estate and gift laws (and a veritable “fiscal cliff” as a nation for related reasons). Nevertheless, at present we have extremely favorable lifetime gift tax exemptions ($5.12 million) for the remainder of 2012. This may be the perfect storm to consider harnessing this powerful tool to generate some security for your family and family investments.

Reference: The New York Times (July 6, 2012) “In an Unusual Tax Year, the Wealthy Turn to Partnerships”

Family Farmers Should Keep a Weather Eye on the Estate Tax Exemption

The Joint Economic Committee recently released a report on the devastating power unleashed upon family farms when an estate tax is triggered. Simply titled “Estate Tax Report Released,” the committee also considered the broader impact on the economy. The report, approved by the American Farm Bureau Federation and examined in Farm Futures, notes that, while farm owners may have a great potential wealth … such wealth is tied up in land (an illiquid asset) and is not necessarily cash-in-hand. However, the IRS will hold you accountable for the estate taxes due on your land, even if you have to sell the land to pay for it. "When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings, or equipment to keep their businesses operating," said AFBF President Bob Stallman. "With 88% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax." If you (or a loved one) own a family farm, then there is no time like the present to make proper estate plans to protect and preserve the farm and the family wealth it represents. You have worked hard to make a living from your farm. Isn’t it common sense to spend some time and money protecting and preserving it?

Reference: Farm Futures (July 26, 2012) “Estate Tax Report Released”