Family Owned Business Exclusion: A
federal estate tax exclusion is available to the owners of a family owned
business and
farms if qualifying family owned business interests exceed 50% of the adjusted gross
estate. The exclusion when combined with the unified credit, allows family
owned business owners to pass $1.3 million in qualified interests free of
federal estate
tax to family members. The family owned business must stay in the family for 10 years
or the federal estate tax savings are subject to recapture. The maximum
family owned business federal estate tax
exclusion is $675,000. An estate claiming the exclusion is allowed a
unified credit exclusion of only $625,000 regardless of the year of death.
If the full family owned business federal
estate tax exclusion is not used,
the taxpayer’s unified credit exclusion is the lower of:
1) The unified credit exclusion for the
year of death; or
2) $625,000 plus the unused portion of the family owned business federal
estate tax exclusion.
