The last step in any worthwhile exit plan is wealth preservation planning, but that doesn't mean you should wait until you are out of the business to begin actively preserving your wealth. In fact, if you wait until the value of your business is converted to cash, it may be too late to realize all of the benefits of wealth preservation. The most significant and powerful claimant to your wealth is the IRS ó especially in the estate tax arena.
Our hypothetical Mr. Kentucky opened our meeting almost apologetically. "I knew I'd waited too long to begin gifting part of the company to my kids when I met with my CPA. She told me that, based on the company's pre-tax cash flow of $2 million per year, the company would be worth as much as $12 million to a third party. I had no idea! Since I don't need that much, I want to transfer at least half the value ó at a lower valuation of course ó before any possible sale. I'm looking at millions in gift taxes.
Mr. Kentucky hired a Certified Valuation Analyst (CVA) who valued the business at $9 million