Jensen Huang, the chief executive officer of Nvidia, and his family are on track to save north of $8 billion in estate and capital gains taxes. So, how has the tenth-wealthiest person in America managed to protect his wealth from the 40% estate tax? He has a plan.

Beginning in 2012, the Huangs set off on their estate tax planning journey by setting up an irrevocable trust. Without getting too far into the weeds, the Huangs and their team of advisors formulated an estate tax plan that involved the use of tax planning maneuvers involving intentionally defective grantor trusts and several grantor-retained annuity trusts (“GRATs”). These tax planning vehicles enabled the Huang family to effectively (and legally) circumvent hefty gift and estate taxes that would apply to a direct transfer of the assets to Huang’s heirs.

Just like the Huangs, most family business owners aim to provide financial stability and support for future generations of their families. Putting in the work on the front end and establishing a plan, like the example above, can potentially result in significant estate tax savings for you and your family in the future.

Estate Tax

The Estate Tax is a tax on your right to transfer property at your death. The tax is calculated based on the “decedent’s gross estate,” less the taxpayer’s remaining gift and estate tax deduction, which in 2025 will be $13.9 million per individual, as well as other specific deductions. Family business owners face a unique hurdle as a substantial portion of their estate typically consists of illiquid interests in private company stock. If this is the case, liquidating assets to pay the estate tax may prove more difficult as estate taxes are payable only in cash. Family businesses may have to be sold or forced to borrow money to fund the payment of a decedent’s estate tax liability.

Ignoring estate taxes altogether is not an affordable option either.  While it is true that the legal burden of the estate tax falls to individual shareholders rather than the family business itself, many family shareholders have not accumulated sufficient liquidity to pay those estate taxes without some action on the part of the company.  The required actions may range from a shareholder loan to a special dividend to the sale of the business. A bit of forethought can relieve the burden on heirs, but when is the right time to get started?

The Sooner, the Better

As a family business owner, it is never too early to review your estate plan. While there are things that will certainly change over time, taking the pulse on your estate plans can have a major impact on the volume of wealth you pass to your heirs.

Preparing to transfer ownership to the next generation in the most tax-efficient way is daunting, but here are some ways you can start thinking about your estate plan:

• Review the current shareholder list & ownership table: Based on the current shareholder list, are there any shareholders that — were the unexpected to happen — would be facing a significant estate tax liability?
• Identifying current estate tax exposures: Will shareholders have to look to the family business to redeem shares or make special distributions to fund estate tax obligations?
• Identify tax & non-tax goals of the estate planning process: If there was no estate tax, what evolution would be the most desirable for your family and business?
• Obtain a current opinion of the fair market value of the business at each level of value (control, marketable minority, and nonmarketable minority).

The most difficult time to make decisions regarding your estate plan is the short term. Should we accelerate plans to sell so we can avoid a larger tax bill? Should we realize some gains in the family securities portfolio to avoid the possibility of an increase in long-term capital gains rates? We believe these questions can be avoided when a well-thought-out estate plan is established. Diligent planning on the part of family shareholders allows directors to focus on the long-term success and sustainability of the business without the distraction of potential estate tax exposures. Give one of our family business professionals a call today to talk about balancing tax concerns with the long view on your family business.