Estate Tax Reform

How does the estate tax unfairly burden family-owned businesses?

The owner of a family-owned business must include the value of the business assets in calculating the value of their total estate. The tax is applied to all business assets whether liquid assets (like cash) or illiquid assets (like machinery or land). In many cases, the majority of the value of an estate is in the illiquid assets, so to pay the tax the business owner must sell the actual assets of the estate.

Financial Planner - The Estate Tax Relief Act of 2009If the business owner wants to ensure that the business remains with the family, they must plan for the tax. The costs associated with planning—such as drafting a will, attorney fees, purchasing life insurance—are expensive and leads to less capital invested back in the business.

The cost associated with planning for and eventually paying the estate tax reduces business capital. All of which means less investment in business growth and job creation.

The estate tax applies to property transferred at death if the value of the property exceeds the estate tax exclusion. While the owner of the estate is responsible for the tax, the heirs often are responsible for the actual payment of the tax upon the death of the owner. The value of the estate to which the tax is applied includes all property the owner has an interest in at the time of death including life insurance, annuities, and business assets.

Estate Tax Coalition

What is the estate tax?