Ideas For Estate and Transition Planning: Gifting Ownership

Authors

Jessica Groskopf, University of Nebraska-LincolnFollow

Date of this Version

7-24-2024

Document Type

Article

Citation

Cornhusker Economics (July 24, 2024)

Institute of Agriculture and Natural Resources, University of Nebraska-Lincoln

Abstract

For many farm and ranch families, bringing children or grandchildren into the operation is the ultimate goal. Successfully bringing additional family members into the operation may require some creativity as all parties need to maintain a viable standard of living. This article is part of a series that will highlight ideas and tactics for bringing another family member into the operation. If this is the first article you are seeing in this series, I would encourage you to go back to the for background and additional guidance.

A strategy that is gaining popularity is the gifting of shares or a percentage of the business from the owner to their heirs. In this article, the person gifting shares, or ownership is called the donor, and the person receiving shares or ownership is the donee.

To employ this strategy, you must have an entity structure that allows for the transfer of shares or changes to the percentage of ownership, such as a partnership, LLC, or corporation. These shares or a percentage of ownership could be gifted to the donee, while the donor is alive or at the donor’s death.

Gifting shares or a percentage of the business can be tricky. Work with your financial team to determine the liabilities, asset basis, and value. When gifting shares or a percentage of the business, you may be able to use the annual gift exclusion or the lifetime gifting exclusion. This should be done with the guidance of an attorney and accountant.