Magazine article Black Enterprise

You Can't Take It with You: Not Having an Estate Plan Can Be Costly

Magazine article Black Enterprise

You Can't Take It with You: Not Having an Estate Plan Can Be Costly

Article excerpt

WHILE MANY ENTREPRENEURS ARE BUSY RUNNING THEIR day-to-day operations, they seldom take the time to consider who will take over the reins when they retire, or how their wealth be passed on to family members in the event of their untimely death or disability.

"In my experience, the more hands-on an entrepreneur is, the more myopic their vision tends to be," says Richard Tomlinson, a CPA and partner of the tax and accounting firm Willis & Tomlinson L.L.P. in Pittsburg, California. "But small business owners really must consider the bigger picture, which includes designing and implementing a succession and estate plan."

[ILLUSTRATION OMITTED]

Research supports Tomlinson's concerns. According to the 2007 American Family Business Survey, nearly a third (31.4%) of family-owned businesses have no estate plan beyond a will, and only 53.5% of business owners have a good understanding of the estate tax, also called the death tax. The estate tax is assessed on the net value of a decedent's estate before distribution to his or her heirs. Today, the estate tax rate is 45% with a $2 million exemption. Current law calls for the exemption to increase to $3.5 million in 2009, and the tax will be repealed for one year in 2010. But in 2011 the exemption will decrease to just $1 million. At that rate, it's estimated that 122,000 estates will file estate tax returns, and that about 60,000 of those will pay taxes totaling $41.4 billion.

"If you're over the age of 50 and the total value of your estate, including your business, principal residence, stock portfolio, insurance policies, and pension plan, equals $2 million or more; or if your business is consistently netting more than $100,000 a year," warns Tomlinson, "you really must decide right now who will succeed you and how you will transfer ownership of your business and wealth. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.