Gifting & The Stock Market

Sep 27, 2022

While the proverb “Every cloud has a silver lining” is always true, sometimes it’s hard to find the silver lining.  Where is that lining for you, as a business owner?

In the last twelve months, the S & P 500 Index ranged from a high in January 2022 of about 4,800 to a low of about 3,700 in July 2022.  It somewhat recovered in September to the 4,000 level, but is volatile and down as of the date of this article.

The value of your business may be rising and falling, too.  Valuations of privately held businesses are influenced by the investor expectations, which are reflected in stock market returns.

“That sounds like more bad news, Kevin, so where’s the silver lining?”

If you are planning on transferring equity interests to family members, now may be the time.

The federal estate tax exemption, which covers gifts, too, allows an individual to transfer up to $12.06 million of value without incurring any gift tax.  If married, a business owner and  their spouse can transfer up to double that, or $24.12 million.  The amount you use through gifts is applied against the value of your remaining assets when you pass. (Note that states have their own and varied rules and taxes).

While $12 million and $24 million are large sums, business owners typically hold other significant assets.  The more you can conserve of your federal exemption, the better off you are.

Note that the current exemption expires on December 31, 2025. While that’s a long way off, with politicians, you never know if that expiration date will stick.


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