Tariffs on imported goods have introduced new complexities for estate planners, particularly when valuing business assets and structuring wealth transfers. In recent years, U.S. tariff policies, from steel and aluminum duties to broad trade-war measures, have created significant uncertainty in markets. This volatility has affected the fair market value of businesses and assets, complicating estate planning for owners involved in international trade. As an expert estate planning attorney, I will analyze how tariffs are impacting asset valuation and estate transfer strategies. We’ll explore the effects on business owners reliant on global supply chains, discuss recent tax law changes intersecting with these issues, and outline strategies to mitigate tariff-induced challenges. The goal is to provide a detailed, analytical perspective for an audience already familiar with estate planning and financial structuring.
Tariffs and Fair Market Value Challenges
Tariffs on imported goods have injected uncertainty into markets, affecting business valuations.
Tariffs function as an indirect tax on imported goods, raising the cost of those inputs for businesses. [procopio.com] When a company relies on imported materials or exports subject to foreign retaliatory tariffs, its profit margins can shrink as costs rise and demand fluctuates. A critical concept in estate planning is fair market value (FMV), the price at which an asset would change hands between a willing buyer and seller, both having reasonable knowledge of relevant facts. [law-journals-books.vlex.com] Tariffs cloud those “relevant facts” by introducing rapid changes in costs and market conditions.
Uncertainty itself is a value driver. The more uncertain the future income of an asset or business, the higher the perceived risk and the lower the valuation. In fact, IRS guidance has long recognized that “uncertainty as to the stability or continuity of the future income from a property decreases its value by increasing the risk of loss of earnings and value in the future.” [law-journals-books.vlex.com]
Tariff announcements exemplify this principle. Even brief news of new tariffs has been observed to trigger immediate declines in stock prices and increase market volatility. Companies find it difficult to predict future earnings, supply chain costs, and global demand under these conditions. [farrellfritz.com]
This volatility complicates appraisals for privately held businesses (common in estate planning scenarios). The valuation of a business is typically based on information known up to the valuation date, but tariffs can render recent financial history unreliable as a predictor of the future. For example, a valuation performed in late 2024 might comfortably rely on historical performance, whereas a valuation as of early 2025, after a 25% tariff on key imports or exports is announced, must grapple with an entirely new risk outlook. The appraiser suddenly faces “another layer of difficulty” in modeling future cash flows. All else being equal, such heightened risk and uncertainty drive down value, as higher discount rates or precautionary discounts are applied. [sbpartners.ca]
In practical terms, a manufacturing company that imports components might see its earnings projections lowered due to anticipated tariff costs, directly reducing its FMV. Similarly, a company exporting to tariff-imposing countries might be valued with a substantial risk discount until the trade environment stabilizes. Estate planners must recognize that the fair market value of business interests can swing significantly with trade policy news. This means any estate planning strategy relying on valuations, from gifting shares to selling a business interest to family, needs to account for this volatility.
Impact on Supply Chain-Dependent Businesses
Business owners who rely on international supply chains are on the front lines of tariff impacts. Import tariffs raise the cost of raw materials and inventory, often disrupting foreign supply chains and increasing expenses for domestic importers. [wegnercpas.com] If a company cannot pass along these higher costs to customers, its profit margins will erode, leading to a lower overall business valuation. Economists have noted that when tariffs are widespread, manufacturers have few places to pivot their supply chains, meaning many will face sinking margins as not all costs can be passed to consumers. [investopedia.com] In short, tariffs can squeeze a business’s financial performance from both the cost side and the revenue side.
For estate planning, this has several repercussions. Owners of supply-chain-dependent businesses may find that the net worth of their estate, often heavily tied up in the business, fluctuates with tariff policies. A family business that looked robust a year ago might suddenly appear less stable if critical inputs now carry a tariff. This could influence the owner’s decisions on succession and transfers. For instance:
- Reevaluating Succession Plans: If tariffs threaten the long-term viability or profitability of the business, an owner might reconsider passing it directly to the next generation. They may explore whether the heirs are prepared to handle a business in a turbulent trade environment or if it’s wiser to sell the business to a larger competitor or private equity (possibly achieving diversification for the estate). The decision to sell versus keep until death (for a potential step-up in basis) becomes more complex when future earnings are uncertain.
- Equalizing Inheritances: Tariff-induced volatility can upset the balance of an estate plan. Perhaps one child is slated to inherit the family import-export business and another child, other assets. If the business value drops due to tariffs, the planner might need to adjust the estate plan (using life insurance, cash gifts, or other assets) to ensure fairness among beneficiaries.
- Cash Flow and Liquidity Considerations: Businesses facing tariff pressures might have tighter cash flows or require reinvestment to adapt (e.g. finding new suppliers, holding more inventory). An estate planner advising such a client will want to ensure the estate has sufficient liquidity for taxes and expenses. This might involve setting aside reserves or obtaining life insurance to cover estate taxes, especially if a business interest value is uncertain or depressed.
From the perspective of valuations, an interesting side effect is that marketability and minority discounts often used in private business valuations could be bolstered by tariff uncertainty. Buyers in the market will pay less for an investment in a company with unpredictable supply costs or trade exposure, which justifies larger discounts in transfer valuations. For example, a minority stake in a family manufacturing firm might be valued with a steep discount if tariffs are threatening its supply chain stability. This is a double-edged sword: it lowers the taxable value for gift or estate purposes, but it also means the family’s wealth (on paper) is reduced.
Depressed Valuations: Risk or Opportunity?
While tariffs create challenges, they also present planning opportunities. A volatile or depressed valuation environment can be advantageous for certain estate transfer strategies. As one trusts and estates analysis noted, during periods of market instability, business valuations often include significant discounts, and this “could be advantageous when gifting assets,” allowing more value to be transferred within the available tax exemptions. [farrellfritz.com] In other words, if a business’s fair market value is temporarily lower due to tariff concerns, an owner can transfer a larger percentage of the business to heirs now, potentially using up less of their lifetime gift tax exemption than they would in a stable market.
This concept is sometimes referred to as a “valuation freeze” or taking advantage of a depressed value. By gifting or selling assets to family trusts during a downturn, any future rebound in value occurs outside the original owner’s estate. Tariffs and trade tensions have created exactly this sort of scenario for some companies. Companies facing potential tariffs may already see discounted valuations of their shares and assets, which presents an opportunity to implement estate planning strategies or restructuring plans to lock in those lower values. [procopio.com] An owner might, for example, gift minority interests in the business to a grantor trust when the values are low. If the company successfully adapts to tariffs or if trade conditions improve, the growth in value accrues to the trust (for the benefit of the heirs) and escapes estate taxation. The taxable value of the gift was based on the lower, tariff-stressed valuation.
Of course, planners must approach this carefully. The IRS expects realistic appraisals and could challenge valuations that don’t reflect known information. It’s important to document how tariffs have been factored into the appraisal assumptions (e.g. lower projected cash flows, higher discount rates) to support the reported gift value. This is where having a qualified business valuation expert involved is key. The use of formula clauses in gift agreements (transferring a defined dollar value worth of shares, rather than a fixed number of shares) is another tool that can mitigate the risk of an unexpectedly different valuation, any excess shares, if the IRS later determines a higher value, can be redirected (sometimes to a charity) to avoid additional gift tax. Techniques like Grantor Retained Annuity Trusts (GRATs) can also be powerful: a GRAT is more effective when asset values are low and poised for potential rebound, which may be the case if a tariff situation is expected to improve in the long term. In a GRAT, if the business value recovers, that upside passes to beneficiaries with minimal tax cost.
In short, a tariff-driven slump in value can be a strategic opportunity for wealth transfer. Advisors and clients should weigh the risks (e.g. the business could further decline, or never recover) against the estate tax savings of transferring wealth when values are compressed.
Gifting and Estate Transfers Under Changing Tax Laws
Estate planners must also stay abreast of tax law changes that intersect with valuation issues. In recent years, the estate and gift tax landscape has been favorable for large transfers, but this is slated to change. The 2017 Tax Cuts and Jobs Act (TCJA) temporarily doubled the federal estate/gift tax exemption. For 2025, the basic exclusion amount stands at a historic $13.99 million per individual (nearly $28 million for a married couple). [farrellfritz.com, irs.gov] This high exemption, coupled with tariff-depressed valuations, creates a window to transfer substantial business interests free of tax. However, starting January 1, 2026, the exemption is scheduled to revert to pre-TCJA levels, roughly half the current amount, around an estimated $6-7 million per individual after inflation adjustments. Unless Congress acts to extend the higher exemption (efforts have been discussed in early 2025) [farrellfritz.com], many more estates will become taxable after 2025.
Estate planners are keenly aware of this “sunset.” It means business owners dealing with tariff issues have a confluence of timing factors: possibly low valuations today and a soon-to-expire high exemption. This combination suggests that making gifts or other transfers before 2026 could be highly beneficial. Not only can one transfer a business interest at a lower value due to tariffs, but they can also use the larger exemption to shelter that transfer. The IRS has clarified that individuals taking advantage of the current elevated exemption will not be penalized when the exemption drops. In late 2019, final regulations confirmed that gifts made between 2018 and 2025 benefit from the higher exemption and won’t be “clawed back” into the taxable estate if the exemption is lower at death. [irs.gov] In other words, use it or lose it, but if you use it now, you don’t lose it later. This assurance removes a major worry and allows clients to confidently make large gifts in 2025 to lock in the benefit.
When planning such transfers, it’s important to also consider gift timing and execution. The annual gift tax exclusion has increased to $19,000 per recipient for 2025 [irs.gov], a minor detail in the context of large business gifts, but useful for smaller transfers to multiple individuals (for example, to gradually shift some value to family members without using up exemption). More critical is ensuring that any large gift (e.g. shares of a family company) is backed by a solid appraisal reflecting the tariff impacts, as mentioned earlier, to withstand IRS scrutiny.
Finally, planners should remember that estate tax is not the only consideration. For instance, if a business owner is contemplating selling the company (perhaps due to tariff headwinds), making gifts of business interests prior to a sale can pass some of the sale appreciation to heirs. But there’s a trade-off: assets held until death receive a step-up in income tax basis to their date-of-death value, which can reduce capital gains taxes for heirs. Gifting before death forfeits that step up. Thus, if tariffs have slashed a business’s value but a turnaround is expected, one might prefer gifting (to use exemption and capture the rebound outside the estate). If instead the business might be sold soon at a depressed price, it could make sense to sell and allow the estate to diversify, using the lower value at death for estate tax purposes or potentially the alternate valuation date if values decline further.
Succession Planning in a Shifting Trade Climate
Beyond the tax-centric strategies, tariffs compel business owners and their advisors to revisit succession planning and business continuity issues. A sudden increase in costs or supply chain disruption can threaten the stability of a closely held business. Estate planners should coordinate with business advisors to ensure that the next generation (or other successors) are prepared to navigate these challenges. Key considerations include:
- Management Preparedness: An owner should evaluate if their successors have the skills to adapt the business model in response to tariffs. As one valuation expert noted, a crisis like tariff implementation is an excellent time to “assess management”, for example, can they find alternative suppliers or new markets to minimize tariff impacts?
[sbpartners.ca] The quality of management directly affects business value, and a strong, adaptable team can preserve or even enhance value despite external challenges. - Buy-Sell Agreements and Valuation Clauses: For businesses with multiple owners or where some family members will inherit and others will not, it’s crucial to have up-to-date buy-sell agreements. Tariff volatility can make agreeing on a fair value difficult if an owner dies or exits. A buy-sell agreement that specifies a valuation method (or a fixed formula) can prevent disputes. Planners might consider inserting language that accounts for extraordinary events (like sudden tariff impositions) so that valuations used in these agreements remain fair. Without such planning, an estate could find itself litigating the value of a business interest if one party believes the appraised value doesn’t reflect a post-tariff reality.
- Diversification and Asset Protection: Succession planning may involve diversifying the family’s holdings to reduce reliance on one tariff-exposed company. This could mean the current generation starts shifting wealth into other investments or the next generation is encouraged to not “put all their eggs in one basket” with the family business. From an estate perspective, this might involve setting up family-limited partnerships or LLCs to hold a mix of assets, thereby spreading risk. It could also involve asset protection trusts to safeguard personal wealth if the business hits severe financial trouble due to geopolitical trade issues.
- Contingency Planning: Tariffs are political tools and can change rapidly with new trade agreements or administrations. Succession plans should be flexible. For example, if an owner plans to retire in five years but current tariffs are slated to expire or be renegotiated in two years, the plan might be to delay certain decisions until there’s clarity. Conversely, if more tariffs are on the horizon, it might accelerate planning actions (such as transitioning customers or supply chains to domestic sources or even moving manufacturing closer to end markets). These operational decisions dovetail with estate planning when determining the future direction and health of the enterprise heirs will receive.
Mitigation Strategies for Estate Planners
Given the interplay of tariffs, valuations, and estate transfers, what strategies can estate planners employ to mitigate adverse effects? Below are several tactics to consider in today’s environment:
- Electing Alternate Valuation Date: If an owner dies when asset values are temporarily high but tariffs or market reactions drive values down soon after, the estate may benefit from using the alternate valuation date. The tax code (IRC §2032) allows estates to value assets six months after the date of death if doing so reduces the overall estate value and tax. This can be particularly relevant in a tariff scenario, for instance, if trade news right after death causes a business’s value to drop, the executor can elect this alternate valuation to lower the estate tax burden. Planners should ensure executors are aware of this option, as it’s time-sensitive and must reduce both the gross estate and the tax to be valid. [otcpas.com]
- Asset Repositioning: Work with clients to reposition assets in anticipation of tariff effects. For example, if a client’s business is heavily import-reliant, they might invest in domestic production capabilities or alternative suppliers. From an estate perspective, any significant capital expenditures or changes in asset composition should be reflected in updated estate plan documents. Trust agreements and wills might need revision if, say, the business takes on debt to weather tariff costs (to clarify who bears that debt or how it affects bequests).
- Insurance and Liquidity Planning: As noted, tariffs can strain cash flow. An estate plan should incorporate liquidity measures. Life insurance can provide liquid funds at death to pay estate taxes or equalize among heirs if the business value is uncertain. Also, consider setting up a line of credit or maintaining a cash reserve within the company or the estate to handle emergencies, effectively a buffer against supply chain shocks.
- Staying Informed and Flexible: Encourage clients to stay engaged with both tax law developments and trade policy changes. For example, if legislative efforts indicate the estate tax exemption might be extended or made permanent at a high level, that could alter the urgency of gifting strategies. On the trade side, if certain tariffs look likely to be rolled back, it might influence the timing of a business succession (perhaps delaying a transfer until values recover). The estate planner’s role is to synthesize these moving parts into a coherent plan. In practice, this means a periodic review of the estate plan, possibly annually in turbulent times, to adjust for new laws and economic conditions.
Proactive Planning Amid Uncertainty
Tariffs on imported goods exemplify how external economic forces can ripple through personal estate plans. They affect the core valuations that determine estate and gift tax outcomes and force business owners to make tough decisions about succession and asset transfers. By understanding the relationship between tariff-driven market volatility and estate planning strategies, advisors can help clients turn challenges into opportunities. A climate of uncertainty, evidenced by near-record levels of policy unpredictability, demands proactive and flexible planning. This includes leveraging depressed asset values for tax-efficient gifting, keeping abreast of tax law changes like the upcoming exemption sunset [farrellfritz.com], and reinforcing succession plans to withstand global supply chain disruptions.
In these times, an estate planner must wear multiple hats: tax adviser, business strategist, and sometimes even family counselor. The analytical approach to planning in a tariff-impacted environment involves stress-testing the estate plan against various what-if scenarios, What if tariffs increase further? What if they are repealed? What if the business must be sold or restructured? By asking these questions and using the tools at our disposal (from GRATs and trusts to alternate valuation and insurance), we can craft estate plans that protect family wealth and legacy, no matter how the trade winds blow. The key is to remain vigilant and adaptive, ensuring that estate transfer strategies continue to align with the client’s goals despite the shifting landscape of global trade and tax policy.
Sources:
- Internal Revenue Service, Rev. Rul. 59-60 (guidance on business valuation factors)
[law-journals-books.vlex.com] - Trevor Hood, “Tariffs and Business Valuation – What’s the Impact?” SB Partners (2025)
[sbpartners.ca] - Evan D. Feder, “How Tariffs Impact Business Transfers” Farrell Fritz (Apr. 4, 2025)
[farrellfritz.com] - Enrique Hernandez-Pulido, “Understanding Tariffs and Strategies for Mitigating Their Impact” Procopio (2024)
[procopio.com] - Mike Steinl, “Tariff Impacts on Supply Chain Businesses” Wegner CPAs (Feb. 25, 2025)
[wegnercpas.com] - Azriel J. Baer, “House Approval May Point to Extension of TCJA” Farrell Fritz (Feb. 28, 2025)
[farrellfritz.com] - IRS News Release IR-2019-189, “Final regulations confirm: Making large gifts now won’t harm estates after 2025”
[irs.gov] - IRS Newsroom, Tax Year 2025 Inflation Adjustments (including estate/gift exclusion)
[irs.gov] - Scott Hoyles, “Should You Elect the Alternate Valuation Date for Estate Tax?” (Jul. 27, 2020)
[otcpas.com]