Planning Opportunities in the Midst of a Crisis: Is it the Right Time for Estate Planning?

For owners of privately held companies, if you have a few moments to spare from addressing the changes that current conditions are having on your business and determining which government stimulus packages might apply to you, now would be a good time to think about estate planning and other planning opportunities. Turning lemons into lemonade.

Several current conditions could possibly lead to lower valuations, which would allow for transferring larger parts of your ownership to a next generation without incurring taxes. The fair market value of privately held companies is affected by such factors as:

• The company’s level of earnings and the outlook for those earnings;
• The relative price level ,of shares traded on public stock markets and recent market volatility ; and
• The certainty (or lack thereof) regarding the outlook for the economy, industry, and the specific company.

Even if/as stock markets begin to rise, it is likely that an underlying level of uncertainty about future financial outcomes will persist for quite a while. This uncertainty creates the perception of increased risk around investment activities, and that higher perceived risk results in lower values.

Lower values of privately held companies also bring to mind other potential planning strategies:

• If a business valuation was recently needed for estate tax reporting purposes, consideration should be given to using the alternate valuation date, which is six months later.
• If consideration has been given to a form of stock-based compensation for key employees, this might be an opportune time to get one started if the desire is to increase the reward to the employee at the lowest possible tax cost.
• If you are thinking of converting the company from C corporation status to S corporation status, the time may be right as the level of built-in gains may be greatly reduced.

To learn more or to request a courtesy consultation, contact:
Kenneth Pia, Jr., Business Valuation Industry Leader, at 203.781.9780 or email Kenneth
Carla Glass, Managing Director, Valuation and Litigation Support, at 203.781.9786 or email Carla

Coronavirus Resource Center

Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.