SCOTUS rules for simplicity, higher taxes

The Supreme Court's decision last week in Connelly vs. IRS involved a common form of succession planning for closely held family businesses — and available alternatives.

"The dispute in this case is narrow," Justice Clarence Thomas wrote in a unanimous opinion. "All agree that, when calculating the federal estate tax, the value of a decedent's shares in a closely held corporation must reflect the corporation's fair market value. And, all agree that life insurance proceeds payable to a corporation are an asset that increases the corporation's fair market value. The only question is whether [the firm's] contractual obligation to redeem [the late stakeholder's] shares at fair market value offsets the value of life-insurance proceeds committed to funding that redemption."

The 9-0 vote answered a resounding "no" to that question. See the story below for more of the court's reasoning in the opinion and the potential impact on estate planning. And have a great week.