Over the years I have observed the inability of many business owners to plan their business and personal estate effectively, for one reason or another. Any excuse doesn’t matter, the bottom line is many (great majority of business owners) don’t have adequate estate and business financial plans. I have often referred to them as “plan by default”, as opposed to a “designed plan”. Guy Baker is were I first heard the terms this way. Very adequate considering the subject.
As you can see in the illustration below, when you consider the exposure of $5 million estate after exemption credits are use, you have the additional loss of the stepped up cost basis. There is a tax ratio of 74% vs. 12% in 2022 if some of the proposals go forth.
Image the business owner who has a high value property which has deferred gain locked in, and the results of that property when at death it is passed to the children?
Here is one of the reasons why business owners should pay attention.