Valuation of Preferred Equity Interests In Estate PlanningValuation of Preferred Equity Interests In Estate Planning

Preferred equity interests have been used for several decades to accomplish certain estate-planning objectives. The characteristics of preferred interests—such as those related to dividend rights, liquidation rights and voting rights—tend to be the primary value drivers of these senior equity interests. 

In the years prior to the enactment of Chapter 14 of the Internal Revenue Code in 1990, estate planners had a fair degree of flexibility in structuring a transaction in which an entity was capitalized (or recapitalized) with preferred equity interests. However, following Chapter 14, estate planners were required to re-evaluate how to properly structure certain family transactions involving preferred equity interests to avoid adverse trans...