Making large gifts to your family can significantly reduce the size of your taxable estate. But hard-to-value gifts, such as interests in a closely held business, can lead to gift tax liabilities (plus interest and possibly penalties) if the IRS determines that the gift was undervalued. To help avoid an unexpected outcome, consider making a defined-value gift. It’s a gift of assets valued at a specific dollar amount rather than a certain number of stock shares or a specified percentage of a business entity. The key is to ensure that the defined-value language in the transfer document is drafted as a “formula” clause rather than an invalid “savings” clause. Contact us to learn more.
