While it’s expected that 2020 will be remembered as the year of COVID, and rightly so, the year has also been colored by how the political uncertainty will affect taxes.

Business owners contemplating or in a transaction have among their main concerns maximizing value, and capital gains taxes — finding a way to minimize the income tax in a transaction, says PNC Wealth Management Senior Wealth Strategist, Private Business Strategist, and Senior Vice President Jim Benedict.

Most, however, haven’t done much estate planning, pre-transaction, typically because they’re more focused on operational issues. So they’re not thinking about long-term issues with their business value. But they should be.

“The fact that we have a tax law that raises taxes in 2026, regardless of who’s in office, is driving a lot of the planning,” Benedict says. “It was before the pandemic. It is now.”

He says the presidential election has compressed the time that’s available to do the planning, which means business owners should act to protect the wealth generated from a liquidity event.

“What we’re doing now, in anticipation of a new administration that is probably less tax favorable to the wealthy, we have clients who are making plans to utilize their bonus estate tax exclusion amount this year so that if the amount is reduced by a future administration, or it returns to the old amounts in 2026, they set up their transfers.”

Benedict says it’s critical to understand the irrevocable nature of these types of transfers so people can utilize their exclusion amount.

“When assets are transferred to heirs, the income goes with it,” he says. “So good cash flow planning is a really important component of estate planning, particularly for business owners.”

On the Smart Business Dealmakers Podcast, Benedict goes into more detail on wealth planning strategies business owners should consider, as well as common issues they tend to overlook.

Listen to the podcast