It’s been nearly two years of navigating uncertainties brought on by COVID-19.

Wouldn’t it be nice to change the narrative and focus on “THE KNOWN” and what we can control?

The first KNOWN is our current tax laws, and that they will be changing.

In the recent series: “What’s Up with President Biden’s Tax Proposals” we talk about what is proposed and insight on how to strategize with the opportunities at our fingertips. A few highlights:

  • Lifetime Gift Tax Exemption: The current lifetime exemption is about $11.7M per person and $23.4M per married couple. Biden has proposed cutting the Lifetime Gift Tax Exemption by half, which is a significant reduction. And, whether Biden is successful in creating a new tax policy or not, the current level is due to sunset on 12/31/2025. So, on January 1, 2026, the exemption will return to around $5.5 to 6 million adjusted for inflation.
  • 1031 Exchanges: A 1031 exchange allows a taxpayer to avoid paying capital gains taxes when selling an investment property by reinvesting the proceeds from the sale, within specific parameters, into another property(s). Right now, there is no dollar limitation in the 1031 guidelines, it just must be real estate, and you have to follow the specific guidelines and parameters outlined in the IRS code. However, in the White House’s wish list, they propose capping the amount of gain you can roll over into a new property tax-free at $500,000.00.

As my partner, Hugh Roberts says:

“In the 40 years I’ve been doing succession planning, there has never been a more urgent time to address your planning. Taxes will be increasing, so whether you are considering selling or want to keep your business in your family, you need to act now to take advantage of today’s highly advantageous tax environment before it’s too late.”

Second KNOWN, your vision.

You have a vision. It may be formally written down, a fuzzy image, or what you want is crystal clear. Either way, based on where you want to go, you most likely know the roadblocks impacting your ability to get there. Roadblocks generally come in people bench strength, successor development, family dynamics, and growth strategy. Achieving your vision and navigating the roadblocks may be where you get stuck, but doing nothing and hoping it turns out for the best will not get you to where you want to go.

People, time, and money are key resources. Time isn’t renewable, more money can create more problems, but PEOPLE and CULTURE can take transform an underdog environment to best-in-class performance beyond expectations. What are you doing to develop your people? Talent is hard to find and keep in our current environment. As we discussed in the series “Innovative Recruiting and Retention Strategies” it takes thinking out of the box and investing in your culture to attract and keep the best and the brightest. You know what you want for your future, and you also know if you currently have the right people and culture to get you there now, or not. If you don’t have the bench strength; act now as it will take time to carefully cultivate a team.

The third KNOWN, the impact your family has on the business.

In our experience it is best to assume nothing is a secret. Employees, family, vendors, and partners observe, over hear and talk. In many situations, it “appears” the family, siblings, cousins, and key leaders all get along, but there are grumblings due to enabling behavior for some while others have to work hard for what they earn. Or, the feeling that one is working hard, taking on all the risk and the others are riding the coattails of their success.

Yes, holding someone accountable for their actions; requiring performance for pay, and taking away undeserved extra perks can create an emotionally charged environment. But it is worth it, because the tiny communication scuffle it may create now, is nothing compared to the catastrophe unresolved issues will create when you are not available to referee and relegate people to their corners.

A seemingly calm environment can quickly turn into a kicked hornet’s nest.

A colleague of mine used this analogy:

‘We can track hurricanes, know their strength, and about when and where they are going to touchdown. If you are in that area, are you going to wait for it standing under your umbrella, or are you going to go to the store, stock up on food and supplies, and/or evacuate the area before it hits?’ When we act on something we know is coming it can maximize our options and opportunities.”

Contact Us and we can help you with insights, other resources, and see if it makes sense to work together. At the very least, in 30 minutes, you may get some ideas you can apply to your business right away.

The article was originally published on the website: The Right Way To Minimize Taxes And Gift Equity To Your Children

The Succession Planning Matrix

Many people put off succession planning because they think it means retirement, exit, and the end. However; succession planning is just the beginning. It gives the owner options in terms of what “their next” looks like, whether that be growth, philanthropy, or a new business venture. Our process focuses are addressing 10 key areas of what we call the Succession

Click the following link for more drill-down resources on The Succession Matrix, or check out our Facebook post.

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We can provide insights and other resources and assess whether it makes sense to work together. In just 30 minutes, you may gain actionable ideas that you can immediately apply to your business. Contact us via phone or email below, or fill out the “Ask An Expert” form.