Estate planning tips for Pennsylvania business owners

On behalf of Kaplin Stewart Meloff Reiter & Stein, P.C. posted in Estate Planning on Apr 14, 2016.

Many Pennsylvania residents will spend a great deal of time and effort building and growing their businesses. Determining what will happen to their business once they have passed away is a primary concern for many business owners, especially as they near retirement or advance in age. There are many estate planning tools that can help a business owner guide the way that his or her venture will be handled once the owner is no longer there to direct the course.

One of the most powerful tools that is available to business owners is a grantor retained annuity trust, or GRAT. These trusts allow business owners to transfer assets into the trust. Those assets will then be “owned” by the trust, which means that they will be effectively shielded from taxation. In the meantime, the business assets will continue to appreciate in value. The trust is set up as an annuity, giving the donor (the individual who funded the trust) the ability to receive payments from the trust for a predetermined period of time.

Once that period of time has passed, the assets held within the trust pass on to the named beneficiaries, free of gift tax. However, if the donor passes away before the predetermined period of time has passed, then the assets will become part of his or her estate. That eliminates the opportunity to avoid gift taxation, which makes it important to choose the timeline carefully.

Grantor retained annuity trusts are only one tool that is available to business owners who are considering estate planning options. There are a number of other choices that can provide a range of benefits. Estate planning is never a one-size-fits-all matter, and Pennsylvania business owners should take the time to meet with an estate planning attorney to determine which tools are best suited to their particular set of goals and needs.  

Source: The Huffington Post, “5 Things Estate Planning Can Do for You and Your Business“, Kc Agu, March 31, 2016