Page 35 - Grapevine SeptOct 2021

In The Winery

The gift tax annual exclusion allows individuals to in the eyes of the IRS, and less estate taxes or even
gift up to $15,000 per recipient per year tax-free. avoiding them altogether.
The lifetime gift tax exemption currently stands
at $11.7 million, and this maximum amount rep- The benefits of any reduction in business value
resents the sum of all taxable gift, estate, and gen- due to the pandemic and the availability of the
eration-skipping giving allowed before taxes are favorable tax rules related to grantor trusts may
due. The temporary nature of the current higher not be here for long. This is a unique opportunity
lifetime exemption has created a level of urgency in for winery owners to take care of what they were
many estate strategies. already planning to do down the line, while taking
advantage of historically favorable tax conditions.
There are proposals in Congress to reduce the Estate planning is a process, not a one-time trust
estate and GST tax exemption to $3.5 million and agreement, and as you become more educated in
the gift tax exemption to $1 million, limit valuation the process through your trusted advisors including
discounts for family businesses, and trigger income your attorney, accountant, wealth and insurance
tax when gifts and transfers of appreciated prop- advisors, your ability to make the key decisions in
erty exceed $1 million. Political analysts expect the process will become easier.
these proposals to be among the Democrats’ top
priorities, not to just increase taxes but to redistrib- Kemp Moyer is Certified Valuation Analyst and a
ute wealth in our country. This puts some pressure Director in the Advisory practice leading the Firm’s
on larger estates that may be affected, including Valuations and Appraisals team at BPM LLP.
many winery owners. To utilize the higher lifetime
exemption before it expires, many high-net-worth Sachi Danish is a Director in Tax Private Client
individuals are acting urgently to accelerate their Services and leads the Estate & Trust practice for
estate planning strategies to avoid a much greater BPM.
potential estate tax burden.

Winery Ownership Estate Planning

Even in an increasingly corporatized wine space,
many wineries continue to be family-owned busi-
nesses. Many owners of closely held wineries,
desiring to keep their legacy in the family, already
intend to pass down the business upon their death
to their children or other inheritors. The increasing
likelihood of a rollback on the lifetime exemption
means winery owners may want to consider trans-
ferring at least some portion of their business in
the near future via gifts, or sales to IDGTs rather
than waiting until death. Gifts and sales of appreci-
ated assets may trigger immediate to grantor trusts
are

While certain wine industry segments have recov-
ered to or even exceeded their pre-COVID sales,
many closely held wineries are experiencing chal-
lenges such as reduced tasting room visits and
lower sales to restaurant customers due to COVID-
19, which often contributes to a lower business
valuation. A lower valuation means a smaller gift

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