Estate and Gift Tax Valuations: Protecting Your Family and Your Business

When it comes to planning for the future as a business owner, few steps are more important than determining the value of your company for estate and gift tax purposes. Whether you’re transferring shares to family members, preparing for retirement, or protecting your heirs, a certified business valuation provides the foundation for minimizing tax exposure and preserving family wealth.

At BizWorth, our certified appraisers help business owners navigate the complex intersection of gift tax, estate planning, and fair market value. Each valuation reflects a company’s true financial position, grounded in data and supported by evidence, not assumptions.

Why Gift Tax Valuations Matter

A gift tax valuation determines the fair market value of a business interest transferred without full compensation, typically between family members. The IRS requires that such valuations be defensible, certified, and compliant with professional standards including the Uniform Standards of Professional Appraisal Practice (USPAP).

If a valuation is too low, the IRS may challenge it, resulting in penalties and additional taxes. If it is overstated, you could pay more in gift tax than necessary. BizWorth’s certified valuations help businessowners strike the right balance by ensuring each report is accurate, compliant, and well-documented.

How Certified Gift Valuations Work

Every BizWorth gift valuation is performed by certified appraisers using objective, data-driven methods. These methods interpret the financial performance of the business rather than subjective opinions about management, customer loyalty, or brand reputation.

In past estate and gift valuation engagements across manufacturing and professional services industries, BizWorth appraisers analyzed multiple years of financial statements to identify recurring earnings, normalize non-operating or discretionary expenses, and determine how these patterns impact fair market value. The result is a valuation grounded in verifiable data and reliable evidence.

Estate Tax Business Valuation vs. Gift Tax Valuation

While the methodologies are consistent, the purpose of each valuation differs.

• Gift Tax Valuations: Typically addresspartial or minority ownership transfers during an owner’s lifetime.
• Estate Tax Business Valuations: Establish the value of a total ownership interest for estate inclusion at the date of death.

BizWorth’s certified appraisers apply the same fair market value standard to both types of valuations. This consistency ensures reports meet IRS and legal scrutiny.

Our Approach: Financial Interpretation, Not Assumption

Many owners assume a valuation means analyzing operations. In reality, our role is to interpret the company’s financial outcomes.

Our appraisers examine:

• Earnings capacity and adjusted income trends
• Balance sheet strength and working capital
• Multi-year cash flow performance
• Asset utilization and revenue efficiency

Rather than making assumptions about management or projecting future performance, we focus on how these qualities are reflected in the company’s historical margins, cash flow, and returns.

Three Valuation Approaches BizWorth Uses

Each certified valuation applies one or more recognized approaches accepted by the IRS.

1. Income Approach

Estimates the present value of expected future cash flows. Certified appraisers project earnings and apply an appropriate discount rate based on risk and expected growth.

2. Market Approach

Compares the company to recent private sales or market transactions of similar businesses. BizWorth appraisers analyze earnings multiples to align the valuation with current buyer expectations and market behavior.

3. Asset Approach

Used when a business has significant tangible assets such as real estate, equipment, or leasehold improvements. This method ensures those holdings are properly reflected while distinguishing them from the company’s operating value.

In many estate and gift valuation engagements, these approaches are blended to produce a balanced and defensible conclusion of value.

Business Valuation for Heirs

A well-supported valuation helps ensure a smooth generational transition. Beyond meeting IRS filing requirements, it provides transparency and minimizes disputes among heirs.

Families often ask:

• “What is the business really worth?”
• “Are shares being distributed fairly?”
• “How should control differences be reflected?”

A certified BizWorth valuation answers these questions objectively. It helps families maintain trust and fairness during transitions.

Common Reasons for Gift Tax Valuations

You may need a certified valuation if you:

• Gift shares to children, trusts, or family members
• Transfer ownership as part of succession planning
• Establish a Family Limited Partnership (FLP) or charitable trust
• Reorganize equity as part of retirement planning

Even if an IRS filing is not immediately required, having a certified valuation provides clarity for future estate and tax filings.

Why Certified Appraisers Matter

The IRS gives greater credibility to valuations prepared by credentialed professionals following USPAP and NACVA standards. Each BizWorth certified valuation is conducted by a Certified Valuation Analyst (CVA) and includes a signed statement confirming compliance.

This certification strengthens credibility with the IRS, attorneys, and financial advisors. It helps protect your family from potential disputes or reappraisals.

What to Expect in a BizWorth Valuation

1. Data Gathering: We review financial statements, tax returns, and ownership structure.
2. Adjustments & Normalization: Non-recurring and discretionary expenses are adjusted to reflect the business’s economic reality.
3. Valuation Analysis: Certified analysts apply the appropriate methods to determine fair market value.
4. Report Delivery: You receive an IRS-compliant report suitable for estate planning, tax filing, or legal review.

This process ensures that every gift and estate valuation is both defensible and aligned with your wealth preservation goals.

Protecting Your Family and Your Legacy

Your business represents years of dedication and hard work. A certified valuation safeguards that legacy by ensuring ownership transfers are handled fairly, transparently, and tax-efficiently.

At BizWorth, we do not just appraise numbers. We interpret them. Our certified appraisers provide clarity and confidence for families planning for the future.

If you are preparing to transfer ownership, plan your estate, or simply understand your company’s value, start your certified valuation with BizWorth today. We will help protect your business, your family, and your peace of mind.

‍