Valuing Your Business for Estate Planning and Gift Purposes

Business Valuation
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Proper estate planning helps you maintain and deploy your wealth by protecting your assets and has the ability to significantly minimize estate taxes.

This is why valuing a business for estate planning and gift purposes is one of the most essential steps to take while transferring your wealth. Furthermore, given the market turmoil and reduced financial performance in the current economic climate, getting a business valuation for proper estate planning is more important (and more beneficial) than ever because the present conditions offer a unique opportunity to achieve further discounts and protect your assets. These factors have culminated to create what may be a once in a decade opportunity.

Why business valuation is necessary for estate planning

Receiving a business valuation in support of estate planning allows you to understand the value of the assets that you hold and plan to give to certain family members. This allows you to divide your interests properly and ensures that no one gets less than their fair share according to your assessment.

Secondly, and perhaps more importantly, valuing a business for estate planning and gift purposes allows you to understand the tax liabilities that would apply to your transfer. This ensures that you have a clear picture of the assets that would be received by your family after the deduction of taxes.

The Role of Gift Tax and Estate Tax in Asset Transfers

Whenever you are doing estate or gift planning, you need to keep the aspect of gift tax and estate tax in mind. This tax applies to a certain amount that you give away in terms of large asset transfers, but it also comes with a significant exemption in terms of the basic exclusion amount (BEA). This amount refers to the total value limit of large gifts given during someone’s life or estate received by heirs after the owner’s death.

Why gift planning requires a business valuation

According to the Tax Cuts and Jobs Act (TCJA) of 2017, the BEA stands at $11.4 million as of 2019. This means that if your gift or estate planning includes assets that are under this threshold, they will be exempted from taxes. However, if the total amount of given interests goes over $11.4 million, the exceeding amount will be subject to gift tax and estate tax, in that order.

Factors Considered in Business Valuation

With that being said, when it comes to transferring the interests in a business, its valuation is subject to a few discounts. This lowers the total value of your business or estate transfer and keeps it from going over the BEA threshold with a realistic valuation.

While valuing a business for estate planning and gift purposes, business appraisers look at various factors for an accurate valuation. This means that professional appraisers do not stop valuing a business at its bank account or physical assets. They also look at factors such as marketability, liquidity and reputation for an accurate assessment that prevents you from unnecessarily breaking the BEA ceiling.

Why you should not procrastinate on getting a business valuation

By getting a business valuation promptly, you can ensure you’re prepared for accurate transfers of your business interests in a way that does not put an excessive burden on the recipients or heirs.

Due to the air of uncertainty in the current economy, these measures have become even more crucial. Fortunately though, the economic condition also presents an unprecedented opportunity to seize a favorable business valuation. To elaborate, the COVID-19 pandemic has and will materially impact the value of private and public businesses. Investors and enterprises are realizing these shifts and are seeking to understand how the global situation will affect future cash flows.

Leveraging Valuation Discounts in Estate and Gift Planning

Getting a business valuation for estate planning allows you to take advantage of minority interest gifts, where you can leverage discounts to gift interests at a reduced but supportable valuation. In today’s economy, you may be able to benefit from stronger discounts relating to marketability or loss of control.

In normal circumstances though, you can still take advantage of discounts. For example, if your business is not publicly traded, its overall valuation might be open for benefits to marketability discounts. Similarly, if you only transfer a small interest in your business, it is valued at less than the actual amount of shares due to a minority discount. Furthermore, if you are the face of the business and it may not likely do as well in the hands of another owner, the valuation may be subject to a key person discount.

Since these valuation discounts are case-sensitive and also depend upon the respective state in a few cases, professionals such as our valuation experts can provide you with accurate advice on valuing a business for estate planning and gift purposes.

The Risks of Procrastination with Business Valuation for Estate Planning

If you delay the process and don’t take the necessary steps to present your gifts and estate on par with real-world valuations, it can cost your heirs a great deal of money.

Why Choose Objective Capital Partners for Your Valuation Needs

At Objective Capital Partners, we specialize in business valuations for estate planning and gift planning. With our focus on speed, accuracy and client needs, we seek to provide you with specific advice to make sure your assets are managed in an optimal manner.

To learn more about our services and discuss your estate and gift planning needs, contact us today. Our team of experts will be happy to answer any questions you may have, and help assist you with your own Estate Planning or Gifting needs.


About the Author:

Channing Hamlet      Channing Hamlet headshot

Managing Director, Objective Capital Partners

20+ Years of Experience

[email protected]


This news release is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, Objective Capital Partners and BA Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person. Securities and investment banking services are offered through BA Securities, LLC Member FINRA, SIPC. Principals of Objective Capital are Registered Representatives of BA Securities. Objective Capital Partners and BA Securities are separate and unaffiliated entities.


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