Some business owners prefer to retain control over their businesses until they pass away. Others would rather retire and let younger family members assume ownership. There are a couple of different options to do that.
Business succession planning is sometimes considered merely part of the general planning for the owner's estate. However, many people who have family businesses prefer to have younger family members run the business long before the current owner passes away. Those owners seek options for other family members to gain ownership of the business in a cost-friendly way.
Recently, the Insurance Journal discussed to ways to do that in "Gifting Agency Stock & Grantor Retained Annuity Trusts."
The options discussed are:
- Gifting – A business owner can take advantage of the gift tax exemption and give stock in the company to other family members. This would need to be done with a careful plan over many years as the individual gift tax exemption in a single year is only $14,000. Owners must also be aware of the lifetime gift tax exemption of $5.45 million (double for married couples), which makes gifting an entire business away only an option for smaller companies.
- Grantor Retained Annuity Trusts – These are fairly complicated trusts that should only be considered with the advice of an attorney. They allow a business owner to transfer ownership to the trust and receive an annuity for a set period of time. After that time runs out, the assets in the trust transfer to the trust beneficiaries.
Whatever you do, this kind of planning should only be undertaken with the advice and assistance of a qualified estate planning attorney.
Reference: Insurance Journal (May 23, 2016) "Gifting Agency Stock & Grantor Retained Annuity Trusts."