Estate Tax

Starting in 2013, a taxpayer can leave a small business worth up to $675,000 to his or her heirs without triggering any federal estate taxes. For tax purposes, the IRS defines a family-owned business as any trade or business that is held at least 50% by one family, 75% by two families or 90% by three families. However, the decedent's family must have at least a 30% ownership stake. To qualify for the $675,000 threshold, the aggregate value of the decedent's family-owned business interests that are passed to heirs must exceed 50 percent of the adjusted gross estate. This requirement is called the 50 percent liquidity test. To find out if you are eligible, speak to your local CPA or attorney.