CLIENT EDUCATION SERIES | BUSINESS VALUATION INSIGHTS
Estate Planning and Business Valuation: Timing Is Everything
By Christian Schweizer, MBA, CVA — February 7, 2026
For most business owners, the business is the estate. It is the asset that took the longest to build, carries the most risk, and represents the largest share of the family’s wealth. Yet in my experience as a Certified Valuation Analyst, it is also the asset most likely to be left unaddressed in an estate plan — not out of negligence, but because the intersection of business valuation and estate planning law is genuinely complex, and the consequences of getting it wrong are rarely visible until it is too late to correct them.
One of the most important thing I tell business-owning clients about estate planning is this: timing matters more than almost any other variable. A valuation conducted at the right moment, under the right standard, for the right purpose, can preserve substantial family wealth. The same valuation performed a year later — or under different tax situation — may produce a dramatically different outcome.
Why Business Value Is Central to the Estate Planning Conversation
When a business owner passes away or transfers ownership, the IRS and applicable state authorities require that the business interest be valued at Fair Market Value — the price at which the interest would change hands between a willing buyer and a willing seller, neither under compulsion, both reasonably informed. This is the same standard that governs most formal business valuation engagements, and it is the foundation of NACVA’s Professional Standards.
That value determines the taxable estate. If the business is worth $4 million and the estate exemption at the time of death is $2 million, the estate may owe taxes on the difference — potentially at rates exceeding 40 percent. For a family that intends to keep the business, that tax liability can be devastating: it may force a sale of the very asset the family planned to retain.
This is not a hypothetical concern. It is a scenario that plays out regularly, and almost always it was preventable with earlier, more deliberate planning.
The Federal Estate Tax Exemption: A Window That May Be Closing
The federal estate and gift tax exemption — the amount that can pass free of federal transfer tax — has been at historically high levels in recent years, reaching nearly $14 million per individual under the Tax Cuts and Jobs Act of 2017. For married couples using proper planning and portability elections, that means a combined exemption of approximately $27.98 million as of 2025.
The Tax Cuts and Jobs Act included a sunset provision that would have reduced the exemption to approximately $7 million per individual starting in 2026. However, the One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently eliminated that sunset. Beginning January 1, 2026, the federal exemption rised to $15 million per individual (or $30 million for married couples), indexed for inflation going forward.
For business owners whose companies have grown significantly, the landscape has changed materially. While there is no longer a “use it or lose it” urgency before year-end, many high-net-worth individuals may still benefit from making strategic lifetime gifts now to lock in asset growth outside their estates — particularly given that future administrations could alter the law.
Tax and estate planning law is complex and evolving, and the information above reflects general knowledge rather than legal advice. Every situation is unique, and I always encourage working with a qualified estate planning attorney or tax advisor to ensure your strategy reflects the most current regulations and is properly tailored to your circumstances.
Taking advantage of lifetime gifting strategies still requires a current, defensible valuation of the business interest, because any gift must be reported to the IRS at its Fair Market Value on the date of transfer
Valuation Discounts: A Legitimate and Powerful Planning Tool
One of the most valuable — and frequently misunderstood — tools in estate planning for business owners is the use of valuation discounts. When a business interest is gifted or transferred as a minority interest (less than controlling ownership) or as an interest that lacks a ready market, the IRS permits the value of that interest to be discounted below its proportionate share of the whole business value.
Two discounts are most commonly applied in practice:
- Discount for Lack of Control (DLOC): A minority owner cannot force a sale, compel distributions, or direct business strategy. That limitation has real economic value to a buyer, and valuation analysts support these discounts with market evidence from actual transactions.
- Discount for Lack of Marketability (DLOM): A privately held business interest cannot be sold quickly or easily. Compared to publicly traded stock, a private business interest is inherently illiquid, and that illiquidity reduces its value to a buyer.
Combined, these discounts can legitimately reduce the taxable value of a transferred business interest by 20 to 40 percent or more, depending on the specific facts and circumstances. That reduction directly lowers the gift or estate tax exposure — and the savings can be substantial for a growing business.
It bears emphasis that these discounts must be supported by rigorous, documented analysis performed by a qualified valuation professional. The IRS scrutinizes them carefully, and unsupported or poorly documented discounts are among the most common triggers for estate tax audits.
This Is a Team Effort — and You Should Not Navigate It Alone
“If you are a business owner and any of the issues discussed in this article apply to your situation — estate tax exposure, planned gifting, succession to family members, or simply uncertainty about what your business interest is worth for estate purposes — we strongly encourage you to consult with a qualified team of advisors. That team should include an estate planning attorney who specializes in business succession, a CPA with experience in transfer tax matters, and a Certified Valuation Analyst who can produce a defensible, standards-based valuation of your business interest. Each discipline addresses a different dimension of the problem, and the consequences of gaps in that team are borne by your family, not your advisors.”
The Role of the CVA in Your Estate Plan
A Certified Valuation Analyst contributes to the estate planning process at several distinct points. The most obvious is the formal valuation of the business interest for gifting or estate tax reporting purposes. But a CVA also plays a critical role in stress-testing proposed planning structures: modeling how different discount assumptions affect overall tax exposure, supporting the documentation that accompanies IRS Form 709 gift tax returns, and providing expert analysis in the event of an audit or dispute.
Equally important is timing. A valuation is a snapshot of value at a specific point in time. If business performance has been unusually strong in a given year, a gifting strategy executed mid-year or following a temporary dip in earnings may produce a more favorable result than one executed at year-end when trailing performance is at its peak. These are not strategies to game the system — they are legitimate considerations that a skilled valuation analyst and estate planning team can evaluate together.
Estate planning for business owners is not a one-time event. It is an ongoing process that should be revisited whenever the business changes materially, whenever tax law shifts, and at minimum every three to five years. A business that was valued for estate purposes five years ago may be worth two or three times that amount today — and an estate plan built around an outdated valuation is not a plan at all.
“The families that protect the most wealth are not those who waited for certainty — they are the ones who planned while the window was open, with a current valuation in hand and the right advisors at the table.”
This article is intended for general educational purposes and does not constitute a formal valuation opinion or engagement. Business valuations performed by this firm are conducted in accordance with the National Association of Certified Valuators and Analysts (NACVA) Professional Standards. For questions about your specific situation, please contact us.
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