2&2 Slider To Leyritz
Well-known member
Is it really that hard to guess whether you'll be worth $20 million or $8 million? And lets say you guess the latter and you're wrong, your kids only get $15 million, Who gives a shit?
The issue is the liquidity. Somebody "worth" $20 mil for estate tax purposes usually doesn't have $20 mil in cash lying around, it is the paper value of an ongoing business. The estate gets hit with a $5 mil tax and doesn't have the cash to pay it, and it is usually difficult to sell off just a portion of the business to generate the cash. And a sell-off of the business to pay the government is the last thing the founder wants to see happen to his hard work (though, of course, we all know he didn't build that). So there needs to be hefty life insurance in place to provide the liquidity, which usually have to start early when the person is healthy to obtain, not when they are 80 with one foot in the grave.
The other issue is valuation. Their are a hundred different ways to value a business for estate tax purposes, so it can be tough to estimate which way the IRS will go with something until the person is dead. I have one family that I deal with regularly where the business value currently varies from $2 million to $55 million depending on the valuation method and applicable discounts.