August 31, 2021

As a small business owner, your company is your wealth. You may not have large investment accounts, and your funds may be tied up in another business endeavor. But what happens after you pass away? Can your heirs face dealing with non-liquid assets? Would they need fluid funds to pay inheritance and estate taxes? Heirs may be so panicked that they create a “fire sale” in order to meet estate taxes, or may even sell out the business. 

Trust can assist with the elimination of or reduction of estate taxes within an estate strategy. This can offer more control to the estate to continue with the family business, as well as keep personal life and non-liquid assets as opposed to selling them as a means to accommodate estate taxes. 

Trusts help business owners and their beneficiaries maintain and grow wealth. 

Estate taxes 

Entrepreneurs are delegated to manage wealth for the duration of their lifetime, and beyond at times. When someone passes away who is wealthy but has no surviving relatives, the federal government will collect taxes. Both state and federal taxes can be collected for wealthy estate owners…varying by state. 

Capital Gains Taxes 

Capital gains taxes deal with the sale of assets such as stock and property. When selling these assets for a profit, one will receive money for the sales value of such property, which can be ultimately taxable by the government on the capital gain. Those wealthy enough can be able to avoid capital gains taxes through donations of these as assets as opposed to directly selling them.  This way, no capital tax gains are paid. 

Charitable Trusts

Polled charitable trusts are designed for the less wealthy who may not be able to afford to establish their own charity, and can be able to avoid capital gain taxes through the donation of their assets to charitable trusts that are already in existence. 

 Donating assets to a charitable trust with existing pools allows them to function like mutual funds, taking donations from different people, and as needed, liquidating assets. You will be joining money, enabling you to make large investments from time to time. 

Smaller donations can also be made through pooled charitable trusts, whether in cash for or asset for, with a typical 41,000 or more in value. Non-profits, mostly well-established tend to offer access to pooled charitable trusts. 

Trust can help business owners in other ways than just avoiding property taxes. 

Trusts can assist families with wealth management, especially when it comes to children who are not of age as of yet. Trusts can assist with the setting up of services for escrow to include retirement funds. As with charitable taxes, trusts can allow for the effects of an increase in the business owners’ ability to receive benefits from the government. Trusts can also, in certain situations, allow for the protection of business assets from being seized by the creditor if they happen to have delinquent debts.

Contact us for more details. Free consultation.

About the author 

Dana Cannon

Dana M. Cannon has many years of experience with Probates, Conservatorships, Trusts and Estates. During that time she has advised clients on multi-million dollar trust administrations; handled complex litigation; performed estate planning; and represented clients in contested and uncontested conservatorship, guardianship, probate and trust matters. She has been a volunteer at the Los Angeles Superior Court Pro Bono Probate Settlement Program since it began.  She understands that these matters may not just involve money. They are often fueled by emotions and because of that this isn’t just business, it’s personal. She looks forward to assisting you with your legal needs.

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