- info@intelekbva.com
- +1 312-800-1924
Estate Planning
Why Business Valuation Matters in Estate Planning
Are you preparing your estate plan and wondering how to properly value your business? Business valuation is a critical aspect of estate planning, and it’s essential to get it right. The value of your business can affect how much estate tax you owe, as well as how your assets are distributed to your heirs. It’s important to work with an accredited business appraiser to deliver a quality valuation that minimizes the risk of audit, penalties, improper taxation, or potential litigation.
Our team of accredited appraisal specialists is dedicated to providing high-quality business valuations that follow the latest IRS guidance and regulations. We understand the complexity and risk of valuing businesses for estate tax purposes and work diligently to ensure that our clients receive a valuation that is highly defensible, built on state-of-the-art valuation processes from both a sophisticated legal and financial perspective.
IRS Valuation Guidance
The IRS requires that estates accurately value all assets, including businesses, for estate tax purposes. Failing to do so can lead to either underpayment or overpayment of estate taxes, which can result in investigations, audits, penalties, incorrect taxation and legal issues.
One of the key sources of guidance for business valuation is Revenue Ruling 59-60, which sets forth the factors that should be considered when determining the value of a business for tax purposes. These factors include the nature of the business, its history and financial condition, the economic outlook for the industry, and the market for the company’s stock or assets.
In addition, the fair market value standard is the ‘standard of value’ used by the IRS to determine the value of property, including businesses, for tax purposes. Fair market value is defined as the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts.
Our deep knowledge of the tax landscape specific to business valuations, with tried and proven valuation processes against federal tax authorities allows us to deliver highly defensible conclusions of value.
See a recent case study that identifies this importance and significant value added through our two face valuation approach.
Estate Tax Threshold – Avoiding Improper Taxation
Proper business valuation can help you avoid improper taxation. The federal estate tax exemption is currently set at $12.92 million for 2023, ($25.85 million for married couples) and if your estate is valued above this threshold, you may be subject to estate tax, up to 40%. However, by accurately valuing your business, you may be able to avoid improper taxation.
A common way to minimize tax upon death is to gift a portion of it prior to death to your beneficiaries. There are specific limits and amounts for gifting conscious of the federal exemption and any appliable state estate tax thresholds, whilst the value of the gifted portions of the business should be determined by a business valuation, which is why it’s crucial to ensure that the valuation is accurate and in compliance with IRS regulations.
Discounts – Minority, Marketability, and Key Man
Discounts are often applied to the value of a business or the specific parcel of interests (shares) for estate planning purposes, lowering the value and hence taxable amount. These discounts can include minority discounts, which are typically applied when an individual does not have control of the business (a minority stake), marketability discounts, which are applied to a minority interest in a privately held business that lacks the marketability of shares that trade on a public stock exchange, and key man discounts, which are applied when the business depends heavily on a single individual.
Discounts are often very material to the valuation, and hence are highly scrutinized by the IRS. The best defense is to have applied the correct discounts, customized based on the case facts that are substantiated, supported and cited by well-established research literature within the valuation report.
InteleK’s accredited appraisers are well versed in the estate planning landscape, working with your advisors to deliver highly defensible conclusions of value that minimize the risks of audits, penalties, improper taxation and potential litigation.
Chat to Our Estate Planning AI Valuation Agent if You Have any Questions
our team
Meet InteleK’s Leaders
Andrew Mackson, CFA, ABV
co-founder & Partner
Cameron Braid,
MBA
Co-Founder & Partner 
Ryan Maguire,
Valuation Expert
Director of Business valuations 
Estate Planning FAQs
Expert insights into Business Valuations for succession, gift tax, and inheritance planning in 2026.
⚠️ General information only. InteleK Business Valuations & Advisory Pty Ltd recommends professional legal and tax advice for all estate matters.
Search 2026 Estate Valuation Topics
The "One Big Beautiful Bill Act" effectively permanently increased the federal estate tax exemption to $15 million per person in 2026. This means valuations are now less about "avoiding" the tax for mid-market estates and more about setting a high "Step-up in Basis." A precise 2026 valuation ensures that heirs inherit the business at its highest defensible market value, eliminating future capital gains taxes.
Yes. With the 20% Qualified Business Income (QBI) deduction now permanent as of 2026, pass-through entities (LLCs, S-Corps) have higher after-tax cash flows. Valuators must now model these permanent tax savings into their Discounted Cash Flow (DCF) projections, which generally results in a higher overall valuation for the business compared to previous years.
If your estate owns a business that holds real estate, we value the specific "fractional interest" you are gifting. Because a 10% owner of a building cannot easily sell their share or force a sale of the property, we apply significant discounts. In 2026, these discounts remain a primary tool for transferring high-value property portfolios at a fraction of their underlying asset value.
Absolutely. If a business's success is tied strictly to the owner’s personal expertise (Personal Goodwill), that value may not be part of the "taxable estate." By bifurcating Personal Goodwill from Enterprise Goodwill, a 2026 valuation can often justify a lower taxable value for the business entity itself, saving the estate 40% in federal taxes on that difference.
No report is 100% audit-proof, but to meet 2026 IRS standards, the report must satisfy "Qualified Appraisal" criteria: it must be prepared by a credentialed appraiser (ASA, ABV, or CVA), use at least two valuation methods (Income and Market), and include a detailed "Economic Outlook" section that specifically addresses post-2025 market volatility.
No. Even though a surviving spouse can "port" the deceased spouse’s $15M exemption, you still need a valuation at the time of the first death to establish the amount of the exemption used and the "Step-up in Basis" for the heirs. Without a 2026 valuation, the IRS may challenge the "ported" amount years later when the second spouse passes away.
Yes, Employee Stock Ownership Plans (ESOPs) are surging in 2026 as a succession tool. A valuation for an ESOP allows the owner to sell the business to employees at "Fair Market Value," often providing the owner with significant tax deferrals (Section 1042) while providing an immediate liquidity event for estate funding.
In 2026, the IRS heavily scrutinizes "Formula" prices (like 4x EBITDA) in family Buy-Sell agreements. For the price to be binding for estate tax purposes, it should ideally be based on a periodic professional appraisal. Formulas often fail to account for current market risk premiums, leading to "gift tax traps" if the formula price is lower than Fair Market Value.
Yes. Under the Connelly v. United States ruling, life insurance proceeds intended to redeem a deceased owner's shares are considered a corporate asset that increases the company's total value. A 2026 valuation must carefully account for these proceeds, or the estate may face an unexpected tax bill on the "inflated" value of the shares.
For 2026 family farms and closely-held businesses, Section 2032A allows the business to be valued based on its "current use" rather than its "highest and best use" (e.g., valuing a farm as a farm, not as potential housing development). This can reduce the estate valuation by over $1.3 million, but it requires a highly specialized appraisal report.
The 2026 annual gift tax exclusion is $19,000 per recipient. By getting a valuation that applies "Minority Discounts," you might find that $30,000 worth of underlying business assets is actually only "valued" at $19,000. This allows you to transfer a larger percentage of your company to your children every year without ever touching your $15M lifetime exemption.
Business valuations in 2026 now specifically include "Data Assets" and "Proprietary AI Models." If your business has a unique data set or custom-trained AI, these are valued as intangible assets. In estate planning, these are often transferred early into "Intellectual Property Trusts" to capture their future growth outside the taxable estate.
Often, yes. States like New York, Oregon, and Washington have much lower estate tax thresholds (some as low as $1M) than the federal $15M level. A 2026 valuation must be precise enough to satisfy both federal and state auditors, who often look for different "Red Flags" regarding local market conditions.
Under 2026 rules, gifts made while the $15M exemption is active are generally "grandfathered." However, if a valuation is found to be "grossly misstated" (off by 50% or more), the IRS can challenge the value and apply "Claw Back" penalties. This makes using a certified, independent appraiser more important than ever.
The biggest risk in 2026 is an estate that is "Asset Rich but Cash Poor." A formal valuation tells you exactly how much cash your heirs will need to pay taxes and expenses within 9 months of death. Knowing your business is worth $20M today allows you to secure the correct amount of life insurance or credit lines now, preventing a "fire sale" of the business later.
No estate planning topics found matching your search. Try keywords like "IRS", "Gift", or "Succession".
Downloadable Ebook – Estate Planning for Business Owners & Their Advisors – A Guide Through the Business Valuation Process.
