If a family forms a corporation, can inheritance taxes be avoided?

[mmonk]

How about gift taxes? After all, all family members would be members of the corporation and all assets would be owned by the corporation which is one person by law, right?

[iceman66]

1. They usually do this by forming trusts.

[mmonk]

4. I am familiar with trusts. However, the trusts weren't complete shields.

If the corporation is a person, the costs involved with legal and tax preparation would not be needed and the huge percentages for the law firms not be needed to be paid out and the purchase of life insurance not needed to cover and fund related expenses and taxes.

[MineralMan]

2. Consult a tax attorney. There's probably a simpler way.

[napi21]

3. There are vehicles you can set up to avoid at least some inh. taxes

but I don't think a corp. is one of them. Your best bet is to check with a financial lawyer &/or a financial consultant.

You do realize you have to be inheriting a whole lot of $$ before you have to pay any fed. inh. taxes on it, don't you?

[mmonk]

5. Depends on if the current scales go back before the exempted

amounts (mine were not and my father's estate did cost a lot of money). However, I'm not asking for information for myself, but as a question in light of the recent Supreme Court rulings. The corporation, in effect, would be a person that couldn't die unless all family members were killed simultaneously.

[cbdo2007]

6. This sounds like an obvious red flag to the auditors so make sure you

do everything by the book.

[KittyWampus]

7. No, and once you incorporate giving shares requires paying taxes on that, too.

[KharmaTrain]

8. The Caps Have Been Raised...

I think the "pass through" or money you can leave for your heirs has been increased to 2.5 million. You can gift each of your children (including in-laws) up to 13,000 a year...and your spouse can do the same...meaning a single child can get 26gs a year, married 52gs.

Many prefer to put money above that into a trust...which keeps it from getting hit too hard in taxes. An S-Chapter or LLC is a bit stickier as those assets aren't considered part of inheritance and can be taxed as capital gains should it be passed on. At least that's what I dealt with in dealing with estates...and those rules constantly change.

Bottom line is a good tax attorney is worth his weight in gold if you're looking for the loopholes.

[mmonk]

10. I'm not really. I will consult legal advice of course. I was asking primarily

in context with the Supreme Court rulings on personhood and corporations.

[KharmaTrain]

11. Here's The Catch-22

While a person can die, a corporation really can't. It can be disolved, but there are no laws that I know of that permit the corporation itself to be passed along. Stock yes...but again it's considered an asset and could get hit real hard by capital gains...especially if a person has held onto the shares a long time and the value of the company has appreciated.

Your question points out how obscene the SCOTUS ruling is...as it gives the corporate individual rights in how it spends its money, but it's definitely not clear as to how it treats its holdings and tax structure.

[bik0]

9. Incorporation just gives the assets a different structure - still an asset

that will count towards the estate.

[ParkieDem]

12. Exactly.

Say a mother, father and their two children form a corporation. Each person owns an equal 25% share. The corporation, in turn, owns the family's assets.

The mother and father's 25% share still has value. When they die and pass those shares on to their children, inheritance tax would be calculated on those shares. It doesn't get around the problem.

[Mopar151]

13. Irving Blackman is THE MAN

On succession planning for small & medium business.
Look at the article in this link http://www.pfonline.com/columns/0109tax.html, and follow on from there. Incorporation, by itself, is not a bar to inheritance tax - the corporation has value and owners, who would be liable for tax.
I've been reading his stuff for years (in Modern Machine Shop), and my take-away is that you can avoid a lot of inheritance tax, IF you plan correctly, and are honest and aboveboard with your heirs. And this does not apply, AFIK, to dynastic wealth, like "Bush's Base".