Gift and Estate Tax Valuation
Managing Complicated Multi-Tiered Entity Valuation Engagements
High net worth business owners, and in particular baby boomers, who have created substantial wealth are becoming increasingly concerned with the orderly transfer of their assets. Planning for effective wealth transfer in the prevailing uncertain tax environment has complicated and confused many wealthy individuals and their counsel. As of the writing of this piece in late 2010, there is no estate tax and the gift tax rate is 35%. However, without out new legislation, in 2011 the estate and gift tax rates both return to 55% and are applicable to transfers greater than $1 million.
Much of today's accumulated wealth has been generated by legacy operating businesses and investments, and, through prior gifting programs and other estate tax planning activities, has been transferred into investment vehicle entities or reallocated into other assets.
For many high net worth individuals and family offices, modern estate planning and investment practices have resulted in complex ownership structures, typically involving multi-tiered entity organizations and businesses with complicated ownership structures and governance.
Mercer Capital has been performing complicated tax engagements for decades. This article is offered with the intention of informing referral sources and their clients about the processes that lead to credible and timely valuation reports.
These processes make for smoother engagements and minimize the surprise and/or resistance to furnishing the information necessary to mitigate potential IRS scrutiny. With evidence of increasing audit risk in many regions and with rising appraisal requirements, high net worth individuals and their advisors need a thorough, proactive understanding of how to contribute to a high-quality, well-informed appraisal work product.