You've spent years building up your business. You've invested wisely, accounted for possible risks and taken the time to build your business into what it is today. You've even groomed the next generation to take over your legacy when the time comes. But have you accounted for gift or estate taxes in your planning? With the high cost of these taxes, failing to plan for them in your estate planning can leave your legacy open to risk. Here's how you can avoid this pitfall through proper, certified equipment appraisals:
Estate Taxes: Knowing How to Approach Equipment Value Protects Your Legacy
Documenting Machine Values
Whether you're planning on passing on a business or just have some good equipment, documenting your equipment values through a machinery valuation can meet several needs at once. It can help prevent fighting by those left behind, with the impression that one family member, partner or friend is getting more than another. If your estate is being divided up between a certain number of people, with equipment left to one and cash to another, it helps determine how much cash the equipment is worth. If you're planning on using a living trust, it also has the advantage of keeping your loved ones out of probate and keeps your accounting and wealth private.
Making Arrangements for Estate and Gift Taxes
Estate and gift taxes can be very heavy, especially if you're passing a large business on to the next generation. By having a current machine valuation performed, you can determine a more accurate picture of what your business assets and equity actually are. When you do this, you can then estimate how much these burdensome taxes may be and make allowances for them either in your life insurance, your business insurance or by leaving a certain amount of equity available to cover these needs. If you are planning on making allowances for these items, you'll want to account for what estate taxes may remove from these funding sources as well.
What Kind of Machinery Valuation?
If you're thinking of simply looking for similar equipment online or finding someone who sells used equipment to give you a general estimate of your machinery's value, we would strongly encourage you to avoid this approach. We've had to try to help families who have suffered a loss whose loved one has gone this route, just to discover that the machinery valuation that was provided was completely inaccurate, whether it's because they need to sell the equipment quickly to pay estate taxes, because the machinery will require extensive work and expense to remove or because the individual who prepared the estimate didn't really understand what they were looking at. Using a certified equipment appraiser helps ensure that the values you're working from are accurate, because the appraiser is required to work within a particular set of constraints and specific methodologies that are approved and often used in probate court.
By keeping an eye on your equipment values and knowing what to expect in terms of estate taxes, you can rest assured that your legacy will be passed to the next generation as you intended.