Tax Planning
Estate freeze is ‘window of opportunity’ for families ing stated interest rates known as the “applicable
federal rate” with today’s short-term interest rate
at 0.75 percent. Hence any appreciation in the
By Beth Fitzgerald present a once-in-a-generation opportunity to tax purposes, Huttle said, through a tax planning asset value at the date of the transfer (using the
THE RECESSION IS especially hard on family- minimize estate taxes, according to attorney technique known as the “estate freeze.” depressed values along with valuation discounts)
owned businesses, which have watched the Frank Huttle, a partner in the Teaneck office of Estate planning transactions for an estate at a rate growing faster than 0.75 percent are trans-
prices they might have gotten for their compa- deCotiis, FitzPatrick, Cole & Wisler. freeze may involve a sale of an interest in the fam- ferred to the next generation, free of estate tax.
nies fall as much as 50 percent from the eco- Those who intend to transfer their busi- ily business for a promissory note or the utilization Huttle said the estate freeze, which allows
nomic boom of a few years ago. nesses to their children can lock in the current of trusts to transfer wealth. These transactions are you to freeze the economic value of the asset
But this decline in asset values may also depressed values and low interest rates for estate subject to Internal Revenue Service rules requir- today, and shift the appreciation to the future gen-
eration, is the right technique for the family busi-
ness “that is ongoing and will weather the storm”
but has seen its value plummet temporarily.
The combination of low asset values and low
interest rates “is a window of opportunity that may
be historic for a family business,” Huttle said.
Kyle Garcia, a director in the Business Valu-
ation Group of MarcumRosenfarb llP, in Rose-
land, performs appraisals of family businesses for
estate planning. “The prices being paid for busi-
nesses are at historic lows. A typical New Jersey
manufacturing company in 2003 or 2004 might
have been valued at 1.5 times book value. Today, if
the earnings have been beaten down by the reces-
sion, it might be valued at 1 times book value.”
Because of the slump in small-business
asset values, “many more people are talking
about estate planning now than at any time in
the last 10 years,” Garcia said. u
E-mail to bfitzgerald@njbiz.com
dine Tax break ‘long overdue’
➤➤ Continued from page 19
meal and entertainment deductions. “If you have
a high percentage of deductions in relation to