Estate Planning and Valuation Shifts You Can’t Ignore

In January, the 59th Heckerling Institute on Estate Planning brought together top industry professionals to discuss the latest developments shaping business valuation, estate planning, and regulatory compliance. Experts from Redwood Valuation attended the conference to gain insight into how recent legal and tax changes are shaping the industry.

This year’s sessions, led by top experts in estate planning, covered landmark Supreme Court rulings, evolving trust structures, tax law shifts, and regulatory changes. Below are the most important insights from this year’s event—and what they mean for your business and estate planning strategies.

1. The Connelly Decision Reshapes Business Valuations

A recent Supreme Court ruling in Connelly v. United States is changing how buy-sell agreements and life insurance proceeds impact estate tax valuations. Traditionally, life insurance payouts used for share buybacks were excluded from a company’s valuation, but the new ruling means they may now count as taxable assets, increasing estate tax liabilities.

Why it matters: Business owners should reassess buy-sell agreements to prevent unexpected tax burdens. Estate planners and valuation professionals must adjust methodologies to comply with the ruling.

2. Purpose Trusts: A New Succession Model with Complex Valuation Challenges

Businesses are increasingly exploring purpose trusts as an alternative to traditional succession planning, prioritizing mission-driven leadership over shareholder profits. Patagonia’s transition to a purpose trust has brought national attention to this model, but valuation challenges remain—particularly when financial returns are no longer the sole driver of business value.

Why it matters: Estate planners and business owners considering this structure must understand how to properly value businesses held in purpose trusts and navigate the legal and tax implications of this model.

3. Reduced IRS Authority? What Loper Bright, Jarkesy, and Corner Post Rulings Mean for Valuation

A series of Supreme Court decisions, including Loper Bright, Jarkesy, and Corner Post, are reshaping the regulatory landscape—potentially weakening the IRS’s ability to enforce tax laws and scrutinize estate valuations. While this could result in fewer aggressive audits, it also creates legal uncertainty in how tax laws are interpreted.

Why it matters: Estate planners and valuation professionals must prepare for shifting IRS enforcement strategies and ensure valuations remain substantiated and defensible.

4. Trust Modifications Are Changing the Estate Planning Landscape

Estate planners are increasingly using Nonjudicial Settlement Agreements (NJSAs) and trust decanting to modify trust structures. While this offers greater flexibility, it also raises valuation and tax compliance concerns.

Why it matters: Trustees and estate planners must work with valuation professionals to ensure trust modifications don’t trigger unintended tax consequences or IRS scrutiny.

5. Step-Up in Basis Rules Remain Uncertain for Business Owners

The step-up in basis rule allows heirs to adjust the tax basis of inherited business assets to fair market value at the time of death, minimizing capital gains taxes. However, recent discussions suggest potential reforms that could alter how business assets are taxed upon transfer.

Why it matters: Business owners and estate planners need to proactively structure succession plans to avoid unexpected tax liabilities.

Final Thoughts

This year’s Heckerling Institute conference emphasized that the estate planning and business valuation landscape is evolving rapidly with increasing legal complexity and regulatory shifts. The best way to prepare? Work with valuation experts who can provide defensible, audit-ready valuations to ensure compliance, minimize scrutiny, and secure long-term financial stability.

Need Expert Valuation Guidance?

Redwood Valuation is here to help. We specialize in business valuations that support estate tax strategies, succession planning, and more. Contact us today to learn how we can help you navigate these changes.