As many know, a succession plan is a critical component of any business owner’s long-term business and financial strategy. Succession plans help to ensure the continuation of your business even after you leave your role as owner. If your company has multiple owners, you may benefit from establishing a buy-sell agreement as a part of your overall succession plan. This article will discuss buy-sell agreements along with other possible options for succession planning.

Buy-Sell Agreements

An important question that you will face when developing a succession plan is how ownership of the business will be transferred when the time comes for you to leave your role as owner. One option for transferring ownership is through a buy-sell agreement. Buy-sell agreements are typically implemented by companies with multiple owners to guarantee business continuity in the event that one owner leaves the business for reasons such as retirement, voluntary exit, disability, or death. Buy-sell agreements help to protect the business by allowing a smooth transition of ownership, preventing owners from selling interests to outside parties, providing a method for assessing the value of company interests, and avoiding certain tax consequences of transferring ownership.

There are two main types of buy-sell agreements: cross-purchase agreements and entity-purchase (redemption) agreements. Under a cross-purchase agreement, the interests of the departing owner are purchased by the remaining owners. In the event of an owner’s death, tax-free life insurance policies (taken out by all owners on each other) are often used to fund this purchase. Under an entity-purchase agreement, the business entity itself purchases the interests of the departing owner, also commonly using tax-free life insurance benefits to fund the purchase. The establishment of buy-sell agreements is merely one component of a comprehensive business succession plan.

Other Options for Succession Planning

Besides buy-sell agreements, other methods of transferring ownership include gifting or selling your business to a family member, selling to management, transferring ownership to your employees, selling to an outside party, or closing the business. Each of these options comes with its own implications, which is why it is important to consult with a knowledgeable advisor when deciding which succession options work best for your unique needs. RBT CPAs’ professionals in our Trust, Estate, and Gift Practice can help you create and update a succession plan that gives you peace of mind in knowing that you, your loved ones, and your business will be taken care of according to your wishes.

RBT’s experts can help you form a succession plan, refer you to an attorney who can draw up the necessary legal documents (or work with your attorney if you already have one), and review legal documents to ensure they accurately reflect your wishes. We are also available to review and update your plan annually to ensure it continues to reflect your wishes and is adapted due to any tax law changes.

If you are interested in learning more, getting started on a succession plan, or reviewing plans you already have in place, please don’t hesitate to give RBT CPAs a call to find out how we can be Remarkably Better Together.

In 2023, the IRS issued Revenue Ruling 2023-02, significantly impacting the transference of assets held in irrevocable trusts. If you are the owner of an irrevocable trust—or are planning to set up an irrevocable trust—you should meet with your accountant to assess the impact of this rule change on your estate plan.

What are the tax benefits of trusts?

There are two basic types of trusts used to transfer assets to beneficiaries: revocable and irrevocable. Revocable trusts can be changed or revoked after they are created; the assets in a revocable trust remain a part of the grantor’s estate and are therefore subject to estate taxes. With few exceptions, irrevocable trusts cannot be changed or revoked. Depending upon the verbiage in an irrevocable trust agreement, transfers to the trust may be considered completed gifts; as such, they are not included in the grantor’s estate and are therefore exempt from estate taxes. If, by the terms of the trust, the grantor maintains the right to determine the beneficiaries and the beneficial enjoyment of the trust assets, the grantor may be deemed not to have made completed gifts when the assets were transferred to the trust. If this is the case, when the grantor passes away, the trust assets will be included in the grantor’s estate and may be subject to estate taxes. An irrevocable trust can be a useful component of a person’s estate plan and long-term tax strategy; however, careful consideration must be given to the terms of the trust agreement.

Up until 2023, assets in revocable trusts and many irrevocable trusts benefited from a provision known as the “step-up in basis” upon the death of the grantor. Under the step-up in basis provision, when the grantor dies, the tax basis (the price originally paid) of a trust’s assets “steps up” to the fair market value at the time of the grantor’s death. What is the significance of this? The step-up in basis provision greatly reduces or eliminates capital gains taxes for the trust’s beneficiary, as he/she is only required to pay taxes on the increase in value of the trust’s assets occurring after the original owner’s death, not the increase in value occurring during the lifetime of the owner.

What changed with Revenue Ruling 2023-02?

With the issuance of Revenue Ruling 2023-02, however, the IRS clarified that any assets held in an irrevocable trust that are not included in the owner’s taxable estate do NOT qualify for a step-up in basis. In other words, an irrevocable trust that excludes the trust assets from an individual’s estate can no longer reap the dual benefits of an estate tax exemption and a step-up in basis. This change, of course, may have significant tax implications for grantors of irrevocable trusts and their beneficiaries.

Assets in many more irrevocable trusts now maintain a carryover basis, as opposed to a stepped-up basis, meaning the assets retain the tax basis of the original owner. Therefore, the capital gains of the gifted assets are calculated using the original tax basis, resulting in higher capital gains taxes for the beneficiary.

This change will begin to impact more people starting in 2026, when the current high exemption threshold for estate taxes ($13.99 million in 2025) is due to sunset. On January 1, 2026, if no actions are taken to change the law, the exemption threshold will reset to approximately $7 million, meaning many more families and individuals will be subject to estate taxes after that point.

Is it time to review your estate plan?

Whether an irrevocable trust remains a tax-beneficial option for transferring your estate depends largely on your individual circumstances. It is important to carefully weigh the tax advantages and disadvantages of the provisions of irrevocable trust agreements with the help of an experienced financial professional.

At RBT CPAs, our Gift, Estate, and Tax practice professionals help clients define their financial goals, understand and weigh their options, and develop an estate plan. We can review legal documents, such as trust agreements, to ensure they are tax-beneficial and aligned with your goals. We are available to meet with you annually to review your estate plan, ensuring it’s on track to reflect your wishes and is adapted to address any tax law changes, such as the ruling discussed in this article.

To learn more about how we can be Remarkably Better Together, please don’t hesitate to give us a call today.

If you turned 73 in 2024 and are the owner of a retirement account, you will likely need to make a minimum withdrawal by April 1 to avoid penalties.

What is an RMD?

A required minimum distribution (RMD) is the minimum amount that must be withdrawn annually from certain retirement plans beginning when the account holder turns 73.

Retirement plans to which RMD rules apply:

• All employer-sponsored retirement plans including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans
• IRA-based plans such as traditional IRAs, Simplified Employee Pension (SEP) IRAs, and SIMPLE IRAs
• Inherited Roth IRAs and Designated Roth accounts after the death of the account holder

When are you required to start taking RMDs?

Owners of IRA-based plans must begin taking RMDs for the year they turn 73, even if they are not yet retired.

Account holders who turned 73 during the year 2024 must take their first RMD by April 1, 2025, and the second RMD by December 31, 2025.

RMDs can be delayed until retirement for holders of workplace retirement plans, unless the account holder is a 5% owner of the business sponsoring the plan.

What happens if required individuals fail to take an RMD?

If a person required to take an RMD fails to withdraw the full amount within the designated time period, that person may be subject to a 25% excise tax on the amount of the RMD. If corrective actions are taken within two years, that amount may be reduced to 10%. The penalty may be waived if the individual can prove the failure to take an RMD was due to “reasonable error” and that the proper corrective steps are being taken.

How are RMDs calculated?

The amount of the RMD is calculated using the balance of the retirement account on December 31 of the previous year divided by a life expectancy factor. The IRS tables listing life expectancy factors for different ages can be found on the IRS website. Most individuals will use the “Uniform Lifetime Table” to calculate their RMD.

Example: A 73-year-old individual has 100,000 in their retirement account (as of December 31, 2023, the previous year). Based on the Uniform Lifetime Table, the life expectancy factor for an individual who is 73 years old is 26.5. To calculate the RMD, you must divide 100,000 by 26.5. The RMD for this person would be $3,773.58.

Can you withdraw more than the RMD amount annually?

Yes, you can withdraw more than the minimum distribution amount.

Are RMDs taxable?

Yes, RMDs are subject to income taxes when they are withdrawn since contributions to the retirement accounts are made with pre-tax dollars. However, in New York State, the first $20,000 of retirement income for those 59.5 or older is tax-exempt. Spouses are eligible for this exclusion as well.

Need more information?

More answers to common RMD-related questions can be found on the IRS’s Retirement Plan and IRA Required Minimum Distributions FAQ page.

To avoid potential penalties, it is advisable to work with an accountant knowledgeable about RMD requirements, deadlines, and calculations. RBT CPAs’ accounting experts are here to guide you through the process of taking the required minimum distributions when the time comes. Give us a call today to find out how RBT CPAs can be of service to you.

One of the primary considerations when developing an estate plan is the taxes that will be due upon a person’s passing. With this knowledge, an estate plan can – and should – proactively include actions to help ensure more of a decedent’s assets go to the people and causes they care about, rather than taxes. This is even more critical when a family business is involved.

Following a person’s passing where there is no surviving spouse but there is an estate, taxes may be due. The most common type of taxes due are on income earned up to the date of death. For example, if a person passes on June 15, 2026, a final tax filing must be made by the following April 15 for any earnings between January 1, 2026 and June 15, 2026.  The executor is responsible for making sure individual income tax returns are prepared and filed, and related taxes are paid.

Income taxes due come from assets remaining in an estate before any distributions are made. Any individual income tax refund owed to the decedent gets added to the estate and distributed with other assets.

Federal and state estate taxes may also be due. Federal estate taxes are due when an estate, including prior taxable gifts, is valued at more than $13,610,000 (this is scheduled to decrease to an estimated $7 million starting January 1, 2026). Estate values above this exemption amount are taxed at 40%.

New York estate taxes are due if an estate is valued at 100% or higher than the state’s exemption amount ($6,940,000 in 2024). For purposes of calculating the estate value, any gifts made within three years of death are clawed back and considered part of the estate. If an estate is valued at:

• More than 105% of the exemption amount (more than $7,287,000 in 2024), state taxes are due on the entire value of the estate – not just amounts above the exemption.
• 100% to 105% of the exemption amount, the exemption phases out and an additional portion of an estate is taxed based on a sliding scale, with the top rate being 16%.

An estate plan should address who bears the burden of estate taxes. If a person’s will or revocable trust is silent on this matter, the person who receives an asset is responsible for paying estate taxes on that asset. If a will states estate taxes are to be paid out of the residuary of the estate, then the estate pays the taxes and distributes any remaining assets.

It’s important to remember that certain assets pass onto a named beneficiary and bypass a will. Two examples are life insurance and individual retirement accounts. In this case, the will or revocable trust should specify how taxes will be paid for these assets.

A third type of tax to consider is the tax due on the income earned on estate assets, such as interest earned on an estate bank account; dividends and interest on an estate brokerage account; and a 401(k), 403(b), or traditional IRA distribution.

In addition, when an individual passes away, their assets are revalued, generally as of their date of death.  If an estate sells assets, the selling price reduced by the date-of-death value generates a gain or a loss. If there is a gain, taxes are due. The federal and state governments want their tax revenues. If no distributions are made, the income taxes become the responsibility of the estate. If distributions are made, the income tax burden may end up being passed to the beneficiary.

If the decedent owned a business, it gets more complicated (which is why every business owner should have an estate and succession plan) and is governed by varying rules depending on whether the decedent operated as a sole proprietor, a partnership, an S-Corporation, or a C-Corporation.

For example, if the decedent owned a sole proprietorship, it may stop operating on the date of death and its assets and debts become part of the estate. For a partnership, an agreement usually spells out whether other partners can buyout the decedent’s share or whether the decedent may leave their partnership interest to beneficiaries. In either case, the partnership is an asset of the estate and needs to be valued.

S-Corporations and C-Corporations are similar to partnerships in that they are considered estate assets that must be appraised. If there are other shareholders of the business, there should be an agreement that details how shares of stock may be handled – whether sold to other shareholders, sold to outsiders, or distributed to beneficiaries.

As mentioned above, a family business is also considered an asset that must be valued for estate tax purposes. If the value of the decedent’s estate exceeds Federal and state estate tax exemptions, taxes will be due. Careful planning is needed to determine how these taxes will be funded. Frequently life insurance, owned by an irrevocable life insurance trust, is used to fund the estate taxes.

I have only provided highlights in this article. There are numerous different scenarios that play out based on each individual situation. Two key thoughts I would like to leave you with:

• You need a will or, even better, an estate plan that clearly defines your wishes and beneficiaries; otherwise, what happens to your estate may be decided by state law.
• When creating or updating your estate plan, be sure to account for tax liabilities following your passing to ensure your legacy remains intact.

If you have any questions about estate taxes or you would like to get started creating or updating your estate plan, RBT CPA trust, estate and tax professionals are available to help. To get started, email mtorchia@rbtcpas.com or call 845-567-9000 and ask for Michael Torchia. We would consider it a privilege to show you how we can be Remarkably Better Together.

True or false? Your will controls who inherits all of your assets upon your death.

You may be surprised to learn the correct answer is false when it comes to certain assets that have a beneficiary designation. In those cases, the beneficiary designation takes precedence.

A primary beneficiary is an individual or entity that you assign to receive the proceeds from a financial account or arrangement upon your death. A contingent beneficiary is the next person to receive the assets should the primary beneficiary pass away. A beneficiary designation is considered a contractual agreement that even a will cannot override.

For life insurance policies, retirement accounts (i.e., 401ks/403bs, IRAs, etc.), Health Savings Accounts (HSAs), and trusts, the beneficiary you name inherits the account assets, generally regardless of what your will states.

For checking or savings accounts, or CDs, you may name a payable on death (POD) beneficiary. For an investment account, you may name a transfer on death (TOD) beneficiary. When you pass away, the beneficiary can simply access the money (to make it easier to cover funeral expenses and such) and bypass probate.

What if you don’t name a beneficiary when one may be named, or one is named but passes away before you do? For a life insurance policy or an IRA – Roth or traditional, the account balance becomes part of your estate and is subject to probate. Similarly, when a beneficiary is named for a POD or TOD account and that individual passes away before you, assets will revert to your estate, negating the primary purpose of such accounts – to bypass probate.

The situation becomes more complex if the beneficiary of your estate is a minor (who can’t claim assets until age 18) or an individual with special needs (who may lose eligibility for government benefits after receiving an inheritance). In such situations, trust may be a solution.

Just as it’s important to review your estate plan annually to ensure your financial legacy is carried out according to your wishes, it’s also important to regularly review beneficiary designations. Situations that may warrant a change in beneficiaries include major life events such as marriage, divorce, the birth of a child, the death of a previously named beneficiary, or a significant change in financial status.

If you overlook this responsibility, assets may not get distributed according to your wishes at the time of your passing. There are numerous stories about ex-spouses being life insurance beneficiaries or the youngest child being the only child not named on an account because beneficiary designations were never updated. If you don’t have children or a spouse, failing to name beneficiaries or not having a will means that state laws govern to whom your assets go.

To ensure your financial legacy is carried out the way you want, be sure to review your beneficiary designations – and overall estate plan – annually. If you need assistance, have questions, or want to schedule an estate planning consultation with RBT CPAs, email irahilly@rbtcpas.com or call 845-567-9000 and ask for Ita. You’ll see why you and RBT CPAs can be Remarkably Better Together. RBT CPAs is also available to handle your accounting, tax, audit, and business advisory needs. Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Some sources say anyone with assets needs an estate plan, while others indicate it only delivers value to the wealthy. The truth is it’s not that simple and depends on each individual’s unique situation, as well as tax laws and legal processes in the state where you reside.

To start the discussion, it’s important to clarify the difference between a will and an estate plan. A will defines how certain financial affairs will be handled upon your death. An estate plan defines how your financial affairs, healthcare decisions, and legal concerns will be handled while you are alive and after your passing. Put simply: a will is one part of an estate plan.

While net worth is one factor that prompts the need for an estate plan, there are others like whether you have a business; a succession plan; a family; a blended family; young children; a dependent with special needs; others dependent on you for care and/or support (i.e., parents or siblings); a health condition that may require long-term nursing or in-home care (or you want protection just in case); concerns about family infighting or external challenges to your will; concerns about an heir’s ability to manage money; philanthropic goals; and more.

In essence, a comprehensive estate plan can help you understand the risks and opportunities related to your unique situation and plan accordingly. The goal is to help ensure your wishes – in life and upon death – are carried out so the people and causes you care about are taken care of in the manner you desire, and tax exposure is minimized.

Consider it an investment in your peace of mind. Documentation and guidance will be in place so, when the time comes, those who will be taking care of your affairs will have a clear roadmap to carry out your wishes.

So, what does estate planning entail? At RBT CPAs, our Trust, Estate & Gift professionals take the time to learn your goals and wishes based on your unique situation. We help you understand your options and their implications. We can point you to legal resources to draw up required documents and we review those documents to ensure they accurately reflect and align with your wishes while keeping an eye on the tax consequences.

It can take several months to complete an estate plan, execute related documents, and complete corresponding actions.  The time and resources you invest in a plan now can save time, money, and distress later.

If you do not have a will, state laws dictate what happens to your assets. Even if you have a will, upon your passing, your estate will go through probate – a legal process for settling an estate – prior to assets being distributed to beneficiaries.

Probate usually takes anywhere from 1 to 2 years to file the initial petition, gather assets, pay taxes and debts, pay administrative costs, finalize matters with the court, and distribute the estate balance. Contentious estates may take considerably longer to settle.  With certain estate planning moves, probate may be avoided altogether.

Once you have an estate plan, it’s a good idea to review it annually to ensure it reflects any changes in your situation and tax laws. (If you decide a will alone will suffice for your situation, we still encourage you to review it annually.)

To learn more about RBT CPAs estate planning services or to schedule a consultation, email irahilly@rbtcpas.com or call 845-567-9000 and ask for Ita. You’ll see why you and RBT CPAs can be Remarkably Better Together. RBT CPAs is also available to handle your accounting, tax, audit, and business advisory needs. Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Different types of trusts are available to help ensure your long-term financial legacy is honored and more of your assets go to the people or causes you care about, rather than taxes.

At the simplest level, a trust is a legal arrangement that gives you, another person, or an institution the ability to manage your money or other assets (like stocks, bonds, real estate, art, jewelry, heirlooms, furniture, and life insurance) for your benefit or the benefit of others, during your lifetime and/or upon your death.

There are two basic types of trusts. Revocable trusts can be changed or amended after they are created; irrevocable trusts cannot (with few exceptions, based on state law). These trusts operate similarly to a will, with one key difference: upon your death, assets in a trust are not subject to probate.

Probate is a legally required process that follows one’s death to confirm a will is valid and that the executor carries it out based on the decedent’s wishes. Probate can take several weeks to several months or even longer in cases where the will is disputed. During the probate process, all of the decedent’s assets and wishes are made public. Having a trust helps you – and your beneficiaries – avoid the probate process altogether.

With a revocable trust, you name a trustee to manage its assets. You are still viewed as the owner of the assets and can make changes at any time. You remain responsible for any applicable taxes. You decide what happens to your trust upon your death. One option is to close the trust and have all assets distributed to beneficiaries. Another option is to have your trust automatically create irrevocable trusts for the people or institutions you name (this type of trust is called a testamentary trust).

When it comes to an irrevocable trust, your assets are moved into a trust managed by a trustee you name. You cannot make any changes or amendments once the trust is created. The trustee takes over all responsibility for the assets, including paying any required taxes; you give up your assets and all control over them. While the trustee can distribute income to you if authorized by the trust agreement, he/she will not distribute principal to you – you are putting 100% trust in that person.

This can sound scary, but it also gives you a way to protect assets while addressing other needs. For example, you may have to spend most of your assets before Medicaid will cover any of your long-term healthcare needs (whether at home or in a nursing home). However, if you open a Medicaid Asset Protection Trust – a type of irrevocable trust – at least five years before requiring care, you may be eligible to receive long-term care benefits via Medicaid and protect your assets at the same time.

Another good example of how a trust can protect assets while addressing other needs relates to a special needs child. If a special needs child is gifted money, they may be disqualified from receiving public assistance. However, a special needs trust allows you to gift money to a special needs child without impacting their eligibility for public programs like Social Security and Medicaid.

There are trusts that protect assets from claims of future lawsuits or creditors; trusts to benefit qualified charities; trusts to protect against reaching the lifetime gift tax exemption; trusts that transfer wealth across generations without tax implications; trusts for beneficiaries who aren’t great managing money or who have multiple creditors; trusts to protect a spouse or family members from high estate taxes; family trusts; funeral trusts; land and life insurance trusts; residence and property trusts; pet trusts; and more, depending on the state where you live.

There is no minimum amount of assets required to open a trust. You do have to cover related legal fees, which can run upwards of $1,000 (or significantly more depending on your total assets and wishes). In general, if you have more than $100,000 in assets and real estate (i.e., a home), you may want to evaluate how the cost of setting up a trust compares to potential tax and other savings. We can help.

We are RBT CPAs Gift, Estate, and Tax practice professionals. We help clients define their financial goals, understand and weigh their options, and develop an estate plan. We are not lawyers; we are accountants and financial planning experts. We can work with your attorney or refer you to one, and we can review legal documents to make sure they accurately reflect your wishes. We can meet with you annually to review your estate plan, ensuring it’s on track to reflect your wishes and is adapted to address any tax law changes that occurred during the year.

If you want to learn more about how we can be Remarkably Better Together, please don’t hesitate to give us a call or send us a message.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

In truth, none of us know what type of medical care we’re going to need in the future. Some may need none and some may need care for years. We just don’t know. What we do know is that future healthcare costs can wipe out lifetime savings, assets, and financial legacies, unless you plan in advance.

According to the NYS Partnership for Long-Term Care, the average cost of a nursing home in the Northern Metropolitan area (covering Dutchess, Orange, Putnam, Rockland, Sullivan, Ulster and Westchester counties) is $466 daily, $14,165 monthly, or $169,980 annually! People with significant assets (over $6 million) may be in a position to cover those costs, even for a long period of time. People with low to no assets will likely be eligible for Medicaid. What about those in between?

For those 65 and up, Medicare does not cover long-term care (LTC); it does cover short-term nursing home expenses for rehab for eligible individuals. Medicaid does cover LTC, if you’re eligible. Eligibility is based on income and total assets, with limits varying by state. For example, in New York, for Medicaid LTC coverage to kick in, the following limits apply:

• Single: a maximum of $1,732/monthly income and $31,175/total assets.
• Married with both spouses requiring LTC: a maximum of $2,351/monthly income and $42,312/total assets.

(The American Council on Aging provides a free test to determine Medicaid eligibility for the elderly. To learn more, click here.)

There is a way to protect your assets and still benefit from Medicaid – a Medicaid Asset Protect Trust or MAPT.  A MAPT is an irrevocable trust. You’ll basically shift assets to a trustee. This allows you to protect a portion of your assets for loved ones while still allowing you to qualify for Medicaid. There are a couple of caveats that are important to know.

First, states have a lookback period for Medicaid eligibility. In most states, including New York, the current lookback period is 5 years  If money or assets are transferred to a trust inside of the lookback period or simply given away, gifted, or sold for below market value, it will delay Medicaid benefits. The delay or penalty period equals the value of the funds transferred/gifted/given away/sold by Medicaid’s regional rate for nursing home care. (The regional rate varies by county and is updated annually.  Click here to see the 2024 New York regional rates.)

In basic terms, if you transfer $100,000 to an irrevocable trust two years before needing a nursing home and assume the regional rate is $10,000/month (just for simplicity’s sake), you would not be eligible for Medicaid assistance for 10 months ($100,000/$10,000) and you’d end up spending the full $100,000 you put in the trust.

On the other hand, if you establish the trust early enough and the lookback period has passed by the time you need LTC, the assets in your MAPT will not count toward your Medicaid eligibility. So, you can get LTC and protect your assets.

Second, there is a trade-off. When you establish an irrevocable trust, you designate someone else as trustee, giving them full control of your assets. You cannot change or cancel the trust in any manner. While the trustee can distribute income to you if authorized by the trust agreement, he/she will not distribute principal to you. That means you are putting 100% trust in that person.

Those are the biggest considerations. There are others. For example, when you die, Medicaid can recover funds paid on your behalf by going after assets like a house. On the other hand, assets placed in an irrevocable trust will not be included in your estate for the calculation of estate taxes or probate.

Interested in learning more about how to protect your assets and ensure you can get the medical care you may need in the future?  RBT CPAs professionals in our Estate, Trust, and Gift Practice can help.

While RBT is not a law firm, RBT CPA professionals in our Estate, Trust and Gift Practice can help you plan for future healthcare needs as part of an overall estate plan. We can help you understand your options and define a course of action; refer you to an attorney who can create related legal documents (or work with your attorney if you already have one); review legal documents to ensure they accurately reflect your wishes; and review and update your plan annually so they continue to reflect your wishes and are adapted due to any tax law changes.

Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

An estate freeze is a sophisticated tool often employed in the realm of estate planning and wealth management, especially within family-run businesses. When executed correctly, it can help reduce taxes owed on your estate upon your death and help transition your business to the next generation in a smooth, tax-effective manner.

So, what is an estate freeze exactly?

Essentially, it’s a tax planning strategy that allows the owner of an appreciating asset (like a business) to ‘freeze’ its value at a certain point in time based on an up-to-date valuation. The future growth of the business is then transferred by gifting to others, frequently children. However, when structured correctly, the owner still retains control over the management of the business.

There are numerous benefits associated with an estate freeze. The most significant of these is the ability to reduce the tax burden upon death. Since the value of the gift is ‘frozen,’ any future increase in the value of the assets will not be included in the estate of the original owner, thus reducing the amount of estate tax payable.

Additionally, estate freezes are an effective way of transitioning wealth to the next generation. They allow the future growth of the business or asset to accumulate in the hands of beneficiaries, providing the next generation with a head start in their wealth accumulation journey. Plus, they won’t owe taxes on the transferred assets, until they die or sell the assets.

It’s important to note that while estate freezes can offer significant tax advantages, they also have potential downsides impacted by variables like business structure and succession plans. For example, if not structured correctly, they may trigger unwanted tax liabilities. Additionally, if the value of an asset decreases post freeze, the original owner could end up paying more in taxes than they would have without the freeze.

Before deciding on an estate freeze technique, individuals should consider their long-term financial goals and the needs of their beneficiaries. To get started consulting a tax professional specializing in estate planning is vital.

RBT CPAs professionals in our Trust, Estate and Gift Practice can provide valuable advice on the suitability of an estate freeze for your specific situation, refer you to an attorney and review legal documentation for accuracy, guide you through tax implications, and help you evaluate potential benefits versus risks.

If you’re interested in learning more, getting started, or reviewing plans you may already have in place, please don’t hesitate to email irahilly@rbtcpas.com or mtorchia@rbtcpas.com.

What’s more, our affiliate, Advent Valuation Advisors, is available to provide the up-to-date business valuation you will need as part of the estate freeze process.

Your RBT CPA client manager is also available to help start the discussion, in addition to handling your accounting, tax, audit, and business advisory needs. Give us a call today and find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Jack and Jill decided it was time to get an estate plan in place. They met with their advisor and started a gifting plan to their children, grandchildren, and great-grandchildren. Unfortunately, both Jack and Jill passed away before the plan was complete. Had they started the gifting plan just a few years earlier they could have saved estate taxes and an additional $1 million could have gone to their beneficiaries rather than to taxes. Now it’s too late.

Alexis and Skylar had been together for 30 years, built a successful manufacturing business, and had plans to travel the world when they retired. That changed when Alexis suddenly passed away at age 54. Without an estate plan and a marriage license, Alexis’ parents were named executors of her estate – not Skylar.

Trevor spent his life building a successful business with 60 employees and total annual revenue of $40 million. He never married or had children. While a niece joined his business after college, she didn’t seem to have the skillset to keep it going long-term. So, he just kept working thinking he had time to figure it all out. At 68, he passed away. A short time later, his business shut down. Now, years later, his estate is still tied up in court, lawyers’ fees are immense, and his siblings, nieces, and nephews are fighting about who gets what.

It’s never too early to put an estate plan in place, but there is a time when it’s too late. Failing to create, review, and update a plan at least once a year can have a significant impact on the people you want to take care of, the value of your estate, your tax obligations, and the legacy you leave behind. With major changes to Federal laws scheduled to take effect in just over 22 months plus the impact of New York laws, it’s even more important that you make time to create and update your estate plan now.

Estate planning is a comprehensive process to manage and protect assets during your lifetime, define how your personal affairs should be managed while you are alive, and confirm what will happen upon your death. It can include setting up trusts, arranging for powers of attorney, establishing healthcare directives, planning for potential long-term care needs, tax planning, and more.

When it comes to your business, an estate plan can foster a smooth transition of leadership and operations by including a succession plan. Estate planning allows business owners to decide who inherits their business, whether it’s family, partners, employees, or a trust. This can help prevent disputes among heirs and ensure that the business endures.

Plus, estate planning helps maximize the value of your assets that go to your beneficiaries, while minimizing tax obligations. By setting up trusts, gifting shares, or establishing buy-sell agreements, you can significantly reduce the tax burden on your heirs. This can be crucial in ensuring that your business remains viable and doesn’t need to be sold to cover taxes. What’s more, estate planning can protect a business from creditors. By strategically structuring business assets and personal assets, an estate plan can shield the business from being used to settle personal debts.

In essence, estate planning is not an option, but a necessity for every business owner. Business owners should consider estate planning as an integral part of their business strategy and seek expert advice to ensure their plans are comprehensive and legally sound.

RBT CPAs professionals in our Estate, Trust and Gift Practice can help you create and update an estate plan that gives you peace of mind in knowing you, your loved ones, and your business will be taken care of according to your wishes during your lifetime and after.

While RBT is not a law firm, we can help you create a succession plan, refer you to an attorney who can create related legal documents (or work with your attorney if you already have one), review legal documents to ensure they accurately reflect your wishes, and review and update your plan annually so they continue to reflect your wishes and are adapted due to any tax law changes.

If you’re interested in learning more, getting started, or reviewing plans you may already have in place, please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.