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New Tax Laws Hurt Family Businesses

According to a recent article in Forbes magazine, the Treasury Department could change the way businesses are valued for tax purposes as soon as December. This would significantly increase estate taxes by closing the loophole that allowed businesses to be valued at a lower price.

Should this happen, there will be wide-ranging effects. For instance, those inheriting a business from their parents will have newly substantial tax burdens. They may even have to sell off part of the family business to meet their tax liabilities.

This strikes one as a fundamentally un-American advance. "I wouldn't be surprised to see Trump tweeting about it," one financial expert said of the rule changes.

Who really benefits?

The revisions to the law are intended to affect wealthy individuals primarily. Indeed this may be the case. Every individual is entitled to a $5.45 million tax estate tax exemption, and married couples receive a $10.9 million exemption, enabling them to avoid a good deal of taxes in most scenarios. As such, the White House has lauded the rule changes as a victory for the middle class. 

"Nobody thought they would go as far as they did"

Still, estate planners throughout the country are calling for individuals to make transactions as soon as they can. "Do them now, with the valuation discounts," said a practitioner in Florida. And, indeed, if you are already considering a transaction, conducting it without haste will carry obvious tax benefits. 

Nevertheless, affected parties will continue to have means to protect their business or estate from liabilities. Grantor trusts, for example, can be used to offset tax burdens one might otherwise pass on. Indeed, the new rules seem only to enforce old wisdom: An estate plan is an ongoing plan, one that should accomodate -- rather than be defined by -- sudden changes in the law

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