--- title: 11 Things You May or May Not Know About Family Attribution description: If you own part of a business, certain of your family members are deemed to own what you own under the family attribution rules. image: https://blog.acgworldwide.com/hubfs/c889234799e865bbe90cee71f6cd2e53_XL.jpg --- [![acg-logo-header.png](https://blog.acgworldwide.com/hs-fs/hubfs/acg-logo-header.png?width=123&name=acg-logo-header.png "acg-logo-header.png")](http://www.acgworldwide.com/) - [Who We Are](http://www.acgworldwide.com/about-acg/) - [Selected Staff Bios](http://www.acgworldwide.com/selected-staff-bios/) - [Culture and Philosophy](http://www.acgworldwide.com/culture-and-philosophy/) - [Advisory Board Members](http://www.acgworldwide.com/advisory-board-members/) - [What We Do](http://www.acgworldwide.com/our-services/) - [Wealth Management](http://www.acgworldwide.com/wealth-management/) - [Investment Advisory](http://www.acgworldwide.com/investment-advisory-services/) - [Third Party Administration](http://www.acgworldwide.com/third-party-administration/) - [Retirement Plan Consulting](http://www.acgworldwide.com/401k/) - [Financial Planning Services](http://www.acgworldwide.com/financial-planning-services/) - [Tax Strategies](http://www.acgworldwide.com/tax-strategies/) - [Who We Help](http://www.acgworldwide.com/our-clients/) - [Businesses](http://www.acgworldwide.com/businesses/) - [Entrepreneurs](http://www.acgworldwide.com/entrepreneurs/) - [Individuals and Families](http://www.acgworldwide.com/successful-individuals-and-families/) - [Foundations and Endowments](http://www.acgworldwide.com/foundations-and-endowments/) - [Press & Resources](http://www.acgworldwide.com/acg-live/) - [Blog](http://www.acgworldwide.com/blog/) - [Company News](http://www.acgworldwide.com/company-news/) - [CBS 6 News Market Briefs](http://www.acgworldwide.com/company-news/bill-fitzgerald-of-cbs-6-news-interviews-with-sandy-wiggins/) - [Monthly Investor Insights](https://blog.acgworldwide.com/topic/monthly-insights) - [Quarterly Commentary](http://www.acgworldwide.com/commentary/) - [Cost of Living Adjustments](http://www.acgworldwide.com/colas-and-limits/) - [Important Disclosures](http://www.acgworldwide.com/acg-live/website-disclosure/) - [Contact Us](http://www.acgworldwide.com/contact-us/) [![Richmond Virginia](https://blog.acgworldwide.com/hs-fs/hubfs/ACG_June2016/images/ACGLogo_KOHi.png?width=280&height=112&name=ACGLogo_KOHi.png "Richmond Virginia")](http://www.acgworldwide.com/) ![Family attribution in qualified retirement plans](https://blog.acgworldwide.com/hs-fs/hubfs/c889234799e865bbe90cee71f6cd2e53_XL.jpg?width=940&name=c889234799e865bbe90cee71f6cd2e53_XL.jpg "Family attribution in qualified retirement plans") # ACG Blog # 11 Things You May or May Not Know About Family Attribution By [David J. Kupstas, FSA, EA, MSEA](http://www.acgworldwide.com/selected-staff-bios/david-kupstas/) - [Tweet](https://twitter.com/share) ![David J. Kupstas, FSA, EA, MSEA](https://blog.acgworldwide.com/hubfs/David-Kupstas-square-4.jpg) David J. Kupstas, FSA, EA, MSEA Chief Actuary *Note:  This article was published in 2016.  The SECURE 2.0 Act of 2022 made changes to certain rules relating to family attribution.  As such, some information in this article may be outdated.* When you own a business and sponsor a qualified retirement plan, there are times you may wish you weren’t the owner.  Being an owner may make you a [Highly Compensated Employee](https://blog.acgworldwide.com/highly-compensated-employee-defined) (HCE) or a key employee, thus restricting your benefits or forcing you to provide your employees more than you intended.  Owning some or all of multiple companies may result in a [controlled group](https://blog.acgworldwide.com/controlled-group-rules-require-multiple-businesses-to-be-treated-as-one).  One might think that a way around these rules is to divert benefits to a family member who doesn’t have any ownership in the business or just have the family member own the business instead of you.  Unfortunately, these strategies are usually not viable because of the “family attribution” rules, whereby individuals are deemed to own whatever part of the business is owned by certain family members.  Here are 11 facts about family attribution rules.  Some of these are fairly well-known, while others you may find surprising:  1. Under [Internal Revenue Code Section 318](https://www.gpo.gov/fdsys/pkg/USCODE-2010-title26/pdf/USCODE-2010-title26-subtitleA-chap1-subchapC-partI-subpartC-sec318.pdf), an individual is deemed to own what his spouse, children, grandchildren, or parents own. If Tony owns 100% of a business, his wife, Maria, is deemed also to own 100% of that business.  Therefore, Maria is an HCE and a key employee even though she owns none of the business in her own right.  1. Adopted children are treated the same as children related by blood.  1. There is no attribution between spouses if they are legally separated.  1. Certain family members are not subject to the family attribution rules. There is no ownership attribution between siblings, cousins, or a mother-in-law and son-in-law, for instance.  1. The rules are a little bit different for controlled groups under [IRC Section 1563(e)](https://www.gpo.gov/fdsys/pkg/USCODE-2011-title26/pdf/USCODE-2011-title26-subtitleA-chap6-subchapB-partII-sec1563.pdf). Attribution continues to apply for parents and children if the children have not attained age 21.  For adult children and grandchildren, the attribution applies only to individuals who own more than 50% of the business.  If Patricia owns 50% of the business and her son, Edward (age 30) owns 4%, there is no ownership attribution.  If Patricia owns 51%, then she is also deemed to own Edward’s 4%, but Edward is not deemed to own Patricia’s 51%.  If Edward were younger than 21, both would be deemed to own 55%.  1. There is no double attribution. If Paul owns 10% of a business, then his daughter, Isabel, is deemed to own that same 10% under Section 318(a).  However, Isabel’s husband, Derek, is not deemed to own the 10% because Isabel does not own it in her own right, and attribution does not flow from father-in-law Paul to son-in-law Derek.  1. Family attribution should not be confused with “family aggregation.” Family aggregation is an old rule under which multiple owners or HCEs were treated as one person and had to share a single compensation limit.  Family aggregation was repealed in the 1990s.  Family attribution is alive and well.  1. Another name for family attribution is “constructive ownership.”  1. There is a spouse noninvolvement exception for controlled groups. If Anthony owns 100% of a dry cleaning business and Ana owns 100% of a veterinary practice, on the surface it would seem that there is a controlled group.  This would mean these two separate and unrelated companies would have to take each other’s employees into account when designing retirement plans.  However, if neither is an owner, director, fiduciary, employee, or manager of the other’s business, then there is no ownership attribution between them.  1. Minor children can reintroduce a controlled group. While there is no attribution between Anthony and Ana in the example above, if they have a minor child, Johnny, then Johnny is deemed to own 100% of both of their businesses.  This would make the dry cleaning and veterinary businesses a controlled group.  Once Johnny turns 21, the controlled group is broken.  1. The parents of a minor child do not need to be married for there to be attribution. Suppose Anthony and Ana are parents to Johnny but are no longer married (or never were married), parted ways years ago, and have no contact with each other.  Until he is 21, Johnny is still deemed to own both businesses, and there is still a controlled group.  While Congress may not have intended such an odd result, the language of the law is clear on this point.  This is a general overview intended to provide basic information about family attribution and may not be relied upon.  There are additional rules not covered here, as well as exceptions to the rules stated above.  [Contact us today](http://www.acgworldwide.com/contact-us/) if you would like assistance in determining how the family attribution rules may affect your business or retirement plan. — Posted on December 02, 2016 by [David J. Kupstas, FSA, EA, MSEA](https://blog.acgworldwide.com/author/david-j-kupstas-fsa-ea-msea) [David J. 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