Are you thinking of transferring stock to your kids, or does one or more of your kids already own stock in your closely held business? Beware. You, your family and your business could be starting on a dangerous journey - dangerous to your economic and tax health. But take heart. This article shows you how to have a safe and rewarding trip. Let's set the scene: A typical owner (we'll call him Andy) of a family-owned business (Taylor Co.) called me to consult about transferring his business to one or more of his children. For our purposes, Andy can have three kinds of children: 1) married or single, 2) own stock of Success Co. or don't, and 3) work for Success Co. or don't. Let's start with Joe's oldest child, Barney, who is single, works full time for Taylor Co., but owns no stock of Taylor Co. As long as any stock that Barney will eventually own is nonmarital property, the stock is safe from Barney's spouse-to-be (let's call her Thelma Lou). Thelma Lou can only have an interest in marital property, which can only be created after Barney and Thelma Lou marry.
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