Gifting during COVID-19 pandemic

Demystifying Valuation, Economic Damages + Forensic Accounting

For business owners who have seen their business struggle and face unique pressures during the past five – six months, the thought of transitioning the business to the next generation may not have even crossed their minds. But if gifting a portion of the business to the next generation is potentially part of your estate plan, now might be a good opportunity to complete a gift.

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Many businesses, although not all, have struggled during the pandemic. With decreases in revenues and increases in expenses related to protection for customers and employees, the bottom line is not what it used to be. This decrease in income may lead to a decrease in value dependent upon the business’ ability and timeline to recover.

A lower value at the date of gifting of shares can lead to a decrease in gift tax and/or an ability to gift more shares than originally anticipated. This can be a powerful estate and succession planning tool for a business owner.

In addition to potential lower values, business owners may want to consider gifting now while the exclusion is still in excess of $11 million. While not known, it is certainly a possibility that the exemption could be lowered with a new administration.

If gifting your business is part of your estate plan or is something you have thought about but were not sure of, now might be the time to start talking to your estate planning attorney about completing a gift. Or you might at least consider consulting with a business valuator for a preliminary value of your business.

If you have questions about the process, please contact us. For more information and resources on COVID-19, see our coronavirus page.

Melissa E. Loughlin-Sines, CPA, CFE, CVA, CFF, ABV, Director, Litigation + Valuation Services