Money Buzz 9/01
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To ensure your wealth transfer goes as smoothly as possible, be sure to address the changes wrought by the new estate tax law. One change, for example, calls for the repeal in 2004 of the provision allowing owners of closely held businesses to exclude roughly $600,000 from the value of their estates. "If a business owner has that provision in his or her will and it's not taken out at the appropriate time, it could really complicate things," says estate tax specialist Jonathan G. Blattmachr, a partner with New York City-based Milbank, Tweed, Hadley & McCloy LLP.
Estate planners now have to provide for a variety of scenarios in a client's will or trust, including near-term decreasing rates and increasing exemptions, the 2010 elimination of the estate tax, and the 2011 reversion to the current system. And they'll likely have to revise it again in 10 years. "I guarantee the law will not stay as it's currently written," says Blattmachr. "So it's going to be a very difficult juggling act."
Divvying Up Debt
Most entrepreneurs prefer the personalized service of neighborhood community banks over the deep pockets of regional behemoths. Over the past three years, in fact, more than 840,000 small businesses have switched their primary business deposits to smaller providers, according to a study by Calabasas, California-based Informa Research Services Inc. Community banks haven't always been able to satisfy entrepreneurs' capital needs, however, because of their legal lending limits. Now more of them are turning to syndicated lending for help.
Usually used by larger banks, syndicated lending allows bankers' banks-or regional institutions that service their member community banks-to purchase the bulk of a business's loan and then parcel out the rest to smaller banks. This allows community banks to offer loans well above their lending caps. Durand, Illinois-based Durand State Bank, for example, could participate in loans well above its lending cap-about $900,000-by doing syndicated loans with the Independent Bankers' Bank in Springfield. "[Our limit was] not going to accommodate many small- to medium-sized entrepreneurs," says the bank's president and CEO, David Nosbisch. "If we [use] the bankers' banks, which can split up the loan so it can be made, everybody wins."