The 2017 Tax Cuts and Jobs Act significantly increased the federal estate tax exemption, but these changes are set to expire at the end of 2025. With 2026 rapidly approaching, now is the time for business owners to obtain a professional valuation of their company. Here's why acting sooner rather than later is critical:
Take advantage of higher exemptions: The current lifetime estate tax exemption of $13.61 million per individual ($27.22 million for married couples) is set to be roughly cut in half in 2026. Getting a valuation now allows owners to maximize gifting and estate planning strategies while the higher exemptions are still available.
Proactive tax planning: With an accurate valuation, owners can work with estate planning professionals to develop strategies to minimize future tax liabilities before exemptions decrease and potential tax rates increase.
Make informed decisions: A current valuation provides clarity on the true worth of the business, allowing owners to make strategic choices about expansion, financing, sale, or merger opportunities.
Understand industry positioning: A professional valuation will show precisely where the business fits within its industry or specialized market, including comparisons to similar businesses recently sold.
Gain financial insights: A valuation that includes intangible assets can provide deeper insights into the company's "real world" financial condition beyond standard financial reports.
Support gift tax returns: If making gifts of business interests, a qualified appraisal provides necessary support for gift tax returns and helps justify any claimed valuation discounts.
Avoid costly disputes: Accurate, professional valuations can help prevent disputes with the IRS over gift and estate tax liabilities.
By obtaining a valuation well before the 2026 changes, business owners gain time to implement appropriate estate planning strategies and potentially save significant amounts in future estate taxes.
At Seacap, we help business owners, and their advisors, successfully navigate mergers and acquisitions, business valuations, and a variety of other strategic situations to maximize value when the owner is ready for the next phase of the business’ lifecycle.
Please reach out when you are ready to have a confidential conversation.