Business owners take steps to avoid hit from estate tax

Even if the estate tax doesn't kill a business outright, it has effects on small operations. Families sometimes struggle to keep the enterprise going from generation to generation while competing against franchises and other competitors.

At Lew Rents, an Olympia-based rental store that specializes in tools for builders, handymen and gardeners, owner Dean Eklund, 55, is the third generation of his family to run the business. His grandfather bought the former Olympia Hardware Co. in 1928, taking over a business that had existed since the 1850s, Eklund said.

The company became Lew Rents in 1961 under his parents' ownership, and it now has three stores in the Olympia area with about 30 employees total. Eklund remembers writing checks to the state and federal governments when his mother died, forcing a challenging business transition.

Eklund thinks the business is big enough that it could be affected negatively by an estate tax if he died unexpectedly, although he said the estate would land in the lower tax brackets.

With that in mind, he's done some planning and is preparing to transfer ownership of a share of the business to his sons, Jamie and Josh, next year, starting a transition that will continue over years.

But that preparation - which Eklund said can cost $50,000 to $60,000 including legal, accounting and appraisal costs - is pricey and additional costs mount up if insurance is purchased to help the next generation deal with the tax bills. Then, Eklund said, there are questions or uncertainties- for instance, would the company's banker continue offering lines of credit to the next generation?

"The plan is in place. The problem is if something happened to me - car crash, plane crash, that sort of thing" before the transition gets far enough along, Eklund said. "That's when the problems come in."

And a bill for estate taxes, when combined with a federal estate tax of up to 47 percent for enormous estates, adds stress at a time the business already is under tremendous pressure to survive, Eklund said.

Dean Hartman, who with three brothers is co-owner of Capital Business Machines, said his company is in its fourth generation. He told The Olympian's Editorial Board in September that sellers faced with an estate tax often cut half of their work force.

Hartman expressed little sympathy for the educators who want more money, saying that the state has set aside dedicated funds for education before - such as the Lottery, but the demand for more continues.

"The thing that bothers me," he said, "is that we already paid for education."

Money and I-920

Two political action committees are supporting I-920's repeal of the estate tax, according to records at the state Public Disclosure Commission:

The Committee to Abolish the Estate Tax raised $1.22 million, according to data on file as of Oct. 11 at the PDC. Donors included Seattle developer Martin Selig, $839,825; John Nordstrom of the department-store family, $75,000; Donald Root, GM Nameplate, $4,000; Steve Hanson, Hanson Motors, Olympia, $950.

Yes on 920 raised $211,456 cash and in-kind aid, including $25,000 from Port Blakely Tree Farms, Tumwater; $25,000 from The Wenatchee World; $25,000 from Pioneer Newspaper Service.

One group formed against I-920:

No on 920 has raised $1.03 million, according to data on file Oct. 11 at the PDC. Donors included the National Education Association, $500,000; Bill Gates of Microsoft, $160,000; Washington Education Association, $100,000; Service Employees International Union, Washington, D.C., $100,000; SEIU State Council, Seattle, $50,00; William Gates Sr., $15,000.