Sarah Anne Campbell, MBA, CFP®’s Post

WSJ -"The Supreme Court Blows Up a Popular Small-Business Succession Plan" “The Court’s little-noticed decision in Connelly v. United States, issued in June, throws a wrench into a common succession strategy for many closely held firms with more than one owner. In this strategy, a company buys life insurance on its owners so that when one dies, there’s cash to repurchase his or her stock. The goal is for the insurance payment to be tax-free and for the company to avoid the burden of funding a share repurchase from operating profits. In Connelly, however, the court ruled that the strategy didn’t provide the expected benefits. As a result, the owner’s estate owed nearly $900,000 more in estate tax….”The bottom line: For many closely held business owners, dealing with the Connelly decision requires help from advisers aware of both income- and estate-tax consequences. This advice won’t come cheap and could suck energy away from running the business. That’s an aggravation—but it’s not as big a pain as a surprise estate-tax bill.”   https://lnkd.in/g3fTU4U7

Business owners commonly used insurance proceeds to fund the repurchase of a deceased owner's ownership interest with the then-fair market value. But a Supreme Court decision has changed the math. In our latest DE Insight, Keith Phillis and Michael Raposa share what shareholders of closely held businesses should be doing to ensure they don’t get hit with a hefty estate tax bill. #scotus #taxlaw #taxattorney #DEinsights #businesssuccession #successionplanning #estatetax #estatetaxes

Business owners commonly used insurance proceeds to fund the repurchase of a deceased owner's ownership interest with the then-fair market value. But a Supreme Court decision has changed the math. In our latest DE Insight, Keith E. Phillis, Esq. and Michael J. Raposa, Esq. share what shareholders of closely held businesses should be doing to ensure they don’t get hit with a hefty estate tax bill. #scotus #taxlaw #taxattorney #DEinsights #businesssuccession #successionplanning #estatetax #estatetaxes https://lnkd.in/e3sFV5fV

HAVE YOU HEARD ABOUT THE RECENT SUPREME COURT CONNELLY DECISION? In short, it found that a corporate redemption of the deceased's ownership interest increased the estate tax value for the value of the life insurance proceeds on top of the value of the business operations. This more than doubled the valuation (and resulted in a significantly greater taxable estate). Many business owners will likely want to update their buy/sell agreements, or they may need to adjust their estate planning.

The recent Supreme Court case Connelly v. IRS highlights the importance of well-structured and properly-funded buy-sell agreements for business owners to avoid unexpected estate tax liabilities. For advisors who work with business owners, this is a critical touchpoint with your clients, taking the time to ensure their buy-sell arrangements are up-to-date and adequately funded to protect their business interests. I recently wrote about this in ThinkAdvisor. Check out the full piece here: https://lnkd.in/e8w_fnjB 

Business owners commonly used insurance proceeds to fund the repurchase of a deceased owner's ownership interest with the then-fair market value. But a Supreme Court decision has changed the math. In our latest DE Insight, Keith Phillis and Michael Raposa share what shareholders of closely held businesses should be doing to ensure they don’t get hit with a hefty estate tax bill. #scotus #taxlaw #taxattorney #DEinsights #businesssuccession #successionplanning #estatetax #estatetaxes https://lnkd.in/eA_6prAY

I wanted to take a moment to shed light on what is likely a boring and uninteresting subject to many but is critically important to anyone who owns or is interested in future ownership of a Small/Medium Business (SMB). This subject is dry, but it's salient, and SMB folks should pay attention. In the wake of several loud headliners from SCOTUS over the last few weeks, this unanimous decision was under the radar, and SMB owners/employees are the clear losers. Connelly v. United States held, in a nutshell, that a business owner's passing and subsequent buyout by a business-held insurance plan are subject to an estate tax. When the plaintiff used a company-held $3.5mm life insurance policy on his brother to buy his brother's shares of their jointly-held company upon the brother's passing in 2013, case law (at the time) did not require him to pay an estate tax on the company's stock purchase. The IRS challenged, and the Supreme Court's ruling now means that the company is liable for nearly $1mm in estate tax on the stock purchase. Yah, that'll be a hit to the bottom line. For SMB's that aren't as cash-laden as larger, tax-proof firms, this ruling was a blow. For a business whose valuation was less than $4mm at the time, paying an estate tax of nearly 25% of the business's value was sure to have an impact on critical business decisions such as hiring, retention, benefits, and more. It's hard to argue against a unanimous Court, but business owners and their employees will suffer as a result of this ruling. So what's the takeaway? Estate planning is hard for anyone, but especially hard for SMB owners whose employees' livelihoods depend upon the business's success. Owner's should be proactive about succession planning with regards to an ownership stake. This article proposes several actionable recommendations that businesses and their owners can take to avoid having to pay estate tax on an ownership stake in the event of an owner's passing. If you made it this far, take a few minutes and give the article a read/listen. #ETA #SMB #Entrepreneurship

Jack's point about reviewing Buy Sell agreements is absolutely worth a read. If you have any questions about the article, or have clients with a Buy/Sell that you think should be reviewed, let me know and our team will be happy to conduct a complimentary review. #estateplanning #lifeinsurance #taxplanning

For most business co-owners, the value of their business shares comprises a big percentage of their estates. Having a buy-sell agreement protects co-owners and their heirs and helps avoid hassles with the IRS. https://lnkd.in/eKupUEpQ #businessowners #buysellagreement

Why Business Owners Should Review Their Buy-Sell Agreements Note: A recent tax case now before the U.S. Supreme Court hasn’t gone well for a small business, highlighting the need for businesses using a similar (and typical) succession planning arrangement to take a look at theirs. https://lnkd.in/es68cinX #smallbusiness #taxplanning #successionplanning #personalfinance #moneymangement