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Fed’s proposal could change tax during estate administration

All property that a Georgia resident has at the time of his or her death — no matter the form of ownership — is subject to the federal estate tax. This tax is paid by the decedent’s estate. This typically occurs before the property is distributed to the beneficiaries during estate administration.

A recent move by the federal government could affect this. Specifically, it may impact a technique that wealthy business owners currently use in order to transfer their assets to their heirs without paying any estate or gift taxes. The plan, which originated from the Treasury Department and the Internal Revenue Service, seeks to place new limits on this relatively common technique that is used to transfer the interest in family businesses.

The proposal could make it more difficult for taxpayers to claim their valuation discounts. These discounts occur when the value of the ownership stakes in a closely held business or land is discounted, as some stakes are not worth as much if they are more difficult to sell or, perhaps, represent a minority interest. Some experts think that this proposal, if ratified, would be a major roadblock for any family-owned business.

Estate planning experts have begun to urge individuals to complete any and all transfers before the government acts. For those who do not act quickly enough, a weighty tax bill may come during estate administration. Georgia residents who are unclear about whether this affects their estate plans will likely benefit by consulting with an experienced estate planning attorney to assess their options.

Source: The Wall Street Journal, “U.S. Aims to Clamp Down on Tactic to Avoid Estate Tax“, Richard Rubin, Aug. 2, 2016