Transferring Business Assets to Children

Thursday, July 30th, 2009

There are several methods for business owners to transfer ownership or assets to their children without the high cost of federal gift tax.  Some methods would include providing numerous money transfers until the exclusion limit, setting up family limited partnership, and setting up a family trust that will receive transferred assets.  A business owner like you should know when would be the right timing to step out of your family business.  Here are some tools you can use:

*Buy-sell agreement - this is a legal contract prearranging your business sale interest with a willing buyer.

*Outright sell - you can receive cash and use it to maintain your lifestyle through selling your business interest to any of your family members

*Grantor retained annuity trusts (GRAT) - a sophisticated succession tool in business which uses irrevocable trusts to transfer assets while at the same time retaining a specific income payment for a particular set of time.

*Private annuities - sale of property wherein the buyer makes an unsecured promise that they will make periodic payments to the seller for the rest of his or her life.

*Family limited partnerships - when you transfer ownership of your business to this partnership, control of general partnership interest will still be with you and you can gift this interest to your family members.

Tags: assets, business owners, buy-sell agreement, family limited partnerships, family trusts, famly business, federal gift tax, GRAT, outright sell, private annuities, trust
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