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Protecting Your Assets Limiting Liability in Your Business Structure Planning for Federal Estate Taxes Transferring Business Interests to the Family Using Annuities To Transfer Business Interests
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PrintUsing Annuities To Transfer Business Interests
Other, more advanced estate planning strategies exist that allow transfers of business interests to the family to be made, without reducing the gift tax exemption.
For example, a private annuity may be used. Here, a child promises to pay a life annuity to the parent, in return for the interest in the business.
The annuity is structured so that its value is equal to the discounted value of the business interest transferred to the child. There is no gift, as the child gives the parent an equal value in return, and thus there is no reduction in the $1 million exemption.
If the parent dies before the annuity is paid off, nothing is counted in the parent's estate, because the annuity terminates at that point. Advanced strategies, especially, require the advice of an estate planning professional.
