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Estate Planning

A. In terms of minimizing tax liability, how would estate planning differ from a partnership to a corporation?

B. For estate planning purposes, what are the advantages of setting your business up as a corporation versus a partnership? Defend your response.

C. Describe Target cororation’s succession plan and whether or not it aligns with Target corporation’s vision.

D. Based on your responses, what estate planning strategy would be most effective in minimizing tax liability? Why?

Answer 1

Answer A. Partnerships on the taxes on the profits they make while corporations need to pay state tax and federal taxes. In corpoations and limited partnership, it is easier to get lifetime gifts of business interest. This gives parents the ability to shift some of their assets out of their estate to children. This helps them in reducing the tax liability. It should be noted that recepient of the life time gift business interest becomes a shareholder with litlle or no control over the management of the corporation. Whereas the recepient of the general partnership interest has an equal right to manage and control the partnership. Under limited liability partnership. the transferred interest and be discounted to refelct their value their value in the market which reduces tax liablity.

Trusts can be used to reduce tax liability of an estate. Corporations are limited in the type of trust which shareholder can use. This give partners in partnership more flexibility in the distribution of their estate due to more flexibility.