Estate Tax Bill Need Not Force Heirs to Sell Business

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Planning Attorney

A recent question to me was about the federal estate tax. Here the client and his wife own a business with several retail stores in New Jersey. They expect the survivor’s estate could be well over $10 million. Their two kids want to continue to operate the stores. What steps can these business owners take to make sure the children will not have to sell the business to pay the government when they pass away?

Even without doing any sophisticated planning, each person can, under the current law, pass up to $5.45 million to his/her heirs, free of federal estate tax. If they take appropriate steps under the current tax law, $10.9 million or more can be passed in total, tax free at the federal level. New Jersey is a different story. In 2017 the exemption is 4 million dollars but in 2018 the death tax is proposed to expire.

However, if the business keeps growing in value, obviously your estates can end up being even larger, and estate taxes could then be an issue. There are a multitude of techniques that may be used to deal with the issue. Space limitations prevent me from describing each in detail, so I will just mention a few: a life insurance trust, a family limited partnership, sales of interests in the business to an intentionally defective trust, or using discount planning techniques.

We have used all of these techniques to assist our clients. These are strategies that are exceptionally complex, and you will need solid legal help as well as the help of a competent accountant to explore your options.

To discuss your NJ Estate Planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.