Updates below due to the Big Beautiful Bill signed into law as of July 4th, 2025.

Key Takeaways

• Valuations Are Mandatory. You must have a qualified appraisal to gift business interests compliantly.
• 2025 Exemptions and beyond are now permanent. In 2026, there is a slight increase in the basic exclusion amount to a maximum of $15 million per person for individuals.
• Discounts Increase Gifting Power. Valuation discounts let you gift more value while using less exemption.
• Gifting Now Avoids Future Estate Tax. Transferring appreciating assets today removes future growth from your estate.

For owners of closely held businesses and the attorneys who advise them, the 2025 estate and gift tax landscape presents a powerful opportunity. With lifetime exemptions nearing historic highs, now is the time to act strategically. Gifting business interests today, supported by an IRS-compliant valuation, could translate to millions in tax savings tomorrow.

At BGH Valuation, we help business owners and high-net-worth families navigate the complexities of estate planning with confidence. Here’s how timely business valuations can protect your legacy, preserve family wealth, and significantly reduce future estate taxes.

How Qualified Valuations Enable Tax-Efficient Gifting to Family or Trusts

When gifting interests in a privately held business, documentation is everything. The IRS requires a qualified appraisal—prepared by a credentialed appraiser under recognized valuation standards—to substantiate the fair market value of gifted shares. This applies whether the recipient is a family member, an irrevocable trust, or a charitable entity. 

Without an appraisal, business owners risk misreporting gift values on IRS Form 709, which can lead to audits, penalties, or even reversal of the tax benefits intended by the gift.

Valuations do more than ensure compliance; they serve as the foundation for minimizing tax exposure and maximizing allowable transfer amounts under IRS guidelines.

2025 Gifting Opportunities

Annual Exclusion Gifts

In 2025, you can give up to $19,000 per person (or $38,000 for married couples) without reducing your lifetime exemption. With a proper valuation, you can determine how much of your business can be gifted under this exclusion—down to the share.

Lifetime Exemption

The $13.99 million exemption per individual (or $27.98 million per couple) allows significant wealth transfers. Gifting now takes advantage of the higher threshold. The new bill that was recently signed into law slightly increases the lifetime exemption to $15 million per individual (or $30 million per couple) for 2026.

Valuation Discounts

Gifts of minority or non-marketable business interests often qualify for discounts of 20–40%, allowing you to transfer more value while using less of your exemption. These discounts must be substantiated with a formal valuation.

Trust Transfers

Gifting to irrevocable trusts—such as family trusts or ILITs—removes those assets from your taxable estate permanently. An appraisal helps support the trust funding with defensible market values, complying with IRS requirements and minimizing risk.

Multi-Generational Wealth Planning

Transferring shares to children or grandchildren now—while the business continues to appreciate—removes those assets and their future growth from your estate. A properly documented valuation ensures that the gift is accurately and defensibly recorded, preserving both tax benefits and intergenerational harmony.

Why Gifting Appreciating Assets Now Saves Millions

The essence of smart estate planning is not just about transferring wealth—it’s about removing future appreciation from the estate while exemptions are high. Closely held businesses, especially those in growth phases, represent ideal assets to gift under the current rules.

Freeze Estate Exposure

By transferring ownership today, you lock in the current valuation. All future appreciation—even if the business doubles or triples in value—will occur outside your taxable estate, avoiding the 40% federal estate tax that applies post-2026.

Leverage High Exemptions

Let’s say you gift $10 million in business interests in 2025. If the business appreciates to $20 million by 2030, your heirs will save approximately $4 million in estate tax—because the growth occurred outside your estate.

Amplify Gifting Power with Discounts

Valuations can apply discounts for lack of marketability (DLOM) and minority interest (DLOC) when valuing business shares. These discounts can range from 20–40%, depending on the facts and circumstances, effectively allowing you to transfer more economic value while reporting less on paper.

Example

A 30% discount on a $10 million enterprise interest means you could gift the stake while reporting a value of only $7 million for tax purposes—saving over $1.2 million in potential estate taxes down the road.

Avoid Costly Mistakes with IRS-Defensible Valuations

Gifting strategies are only as strong as the valuation that supports them. The IRS carefully scrutinizes gifts of non-public assets, especially when large discounts or trusts are involved. If your appraisal doesn’t meet the IRS’s standards, your gift could be challenged—leading to penalties or loss of exemption.

The Risks of Poor Valuation

Undervaluation

If the IRS deems your appraisal unreasonably low, they may challenge the reported value, assess back taxes, and impose accuracy-related penalties ranging from 20% to 40%. Worse, they may invalidate the gift entirely, resetting the statute of limitations and re-opening your return.

Overvaluation

Overstating the value of your gift leads to overuse of your lifetime exemption, unnecessarily eroding your future estate planning flexibility. While less likely to trigger an audit, it can cost you millions in lost tax efficiency.

Non-Compliant Appraisals

The IRS requires that business valuations used for gift tax purposes be conducted by qualified appraisers—those who hold recognized credentials, regularly perform valuations, and comply with USPAP and IRS guidelines. Appraisals that fall short are often dismissed outright.

How BGH Valuation Protects Your Legacy

Certified Expertise

Our appraisers hold recognized credentials (ASA, CVA, ABV) and specialize in closely held business valuation for estate and tax planning.

Defensible Methodology

Every BGH report is meticulously prepared to withstand IRS scrutiny, with comprehensive documentation of all assumptions, adjustments, and discount rates.

Audit-Ready Deliverables

Our valuations are designed not just to meet IRS requirements but to preemptively address the questions and concerns a revenue agent might raise.

Expert Tip: The IRS considers the appraisal date and report delivery date critical. Make sure your appraisal is contemporaneous with the gift and follows all required disclosure procedures.

Conclusion: Act Now, Benefit for a Lifetime

Gifting business interests with a qualified valuation is one of the most effective estate tax strategies available to high-net-worth individuals in 2025. With the lifetime exemption at a near-historic high the time to act is now.

A professionally prepared valuation from BGH not only ensures compliance and avoids IRS scrutiny but also allows you to leverage every possible discount and exemption. It’s not just about gifting—it’s about gifting smart.

Ready to Take the Next Step?

Let BGH Valuation help you:

• Maximize your 2025 estate and gift tax exemption
• Document fair market value with an IRS-compliant appraisal
• Transfer wealth strategically to trusts or family members
• Avoid costly valuation errors and penalties
• Schedule a confidential consultation today. Your future self—and your heirs—will thank you.

Frequently Asked Questions

1. Why is a business valuation necessary for gifting shares?

The IRS requires a “qualified appraisal” for gifts of non-public business interests to determine fair market value. Without it, you risk penalties, increased tax liability, and disqualification of tax benefits.

2. What’s the difference between the annual exclusion and the lifetime exemption?

The annual exclusion allows individuals to gift up to $19,000 per recipient (or $38,000 per couple) tax-free each year. The lifetime exemption is a cumulative amount—$13.99 million per person in 2025—used for larger gifts and estate transfers. The new bill that was recently signed into law slightly increases the lifetime exemption to $15 million per individual (or $30 million per couple) for 2026

3. What are valuation discounts, and how do they work?

Valuation discounts reflect reductions in value due to lack of control (minority interests) or marketability (non-public shares). These discounts reduce the appraised value of the gifted interest, allowing you to gift more economic value with less tax exposure.

4. Can I gift business interests to a trust instead of directly to family members?

Yes. Gifting to an irrevocable trust—such as a family trust or ILIT—removes the asset from your taxable estate and provides greater control over how the asset is managed and distributed.

5. How do I ensure my valuation is IRS-compliant?

Work with a credentialed appraiser who follows USPAP standards and IRS guidelines (such as Rev. Rul. 59-60). BGH Valuation specializes in producing  defensible reports that meet these exacting standards.