Client Tip for September 2016: Family Gifting Discount

 In Client Tips

For estate planning purposes many individuals make gifts of ownership interests in a closely held family business to other family members.  This allows the donors to lower their overall estate.  Significant valuation discounts are commonly utilized through the use of minority and lack of marketability discounts.  These discounts are often as much as 30%.  Therefore, a gifted interest of 10% with a market value of $100,000 after the discounts may only be valued at approximately $70,000 for gifting purposes.

The IRS has proposed regulations barring valuation discounts for gifts within a family where the family still has control of the business after the gift.  This proposed regulation would apply to closely held operating businesses as well as family entities that hold only passive assets (e.g. real  estate).

This proposed regulation change is in a 90 day public comment period through December 1, 2016.  Many feel the regulations will become effective soon after the comment period.  Others feel that Congress will override the IRS and continue to allow the discounts on certain types of gifts to family members.  Only time will tell, but if you are considering making such a gift, you should discuss the situation with your estate attorney and CPA before the proposed regulations are finalized into law.

Another consideration is that the estate and gift tax exemption is currently $5.45 million per individual and $10.9 million for a married couple.  One of Hillary Clinton’s tax platform proposals is to reduce lifetime gifting to $1 million per individual (currently $5.45 million) and the estate exemption to $3.5 million per individual and $7 million per married couple.

“Your Partner In Success”


“The only limit to our realization of tomorrow
will be our doubts of today.”

Franklin D. Roosevelt — 32nd President of the United States from 1933 to 1946 (elected 4 terms) President during ending of Great Depression and World War II.



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