In late 2010, the federal government extended the federal estate tax, with higher exemptions, through 2012. Although the gift and estate tax exemptions are now both at $5.12 million for 2012, that doesn’t mean you can ignore your estate plan. Now is the time to ensure that your wealth transfer plan operates like it should, considering both tax and non-tax factors.
Changes in your family situation, the types and values of your assets, and the gift and estate tax laws should prompt you to adjust your wealth transfer plan so that it achieves your goals and objectives.
Do you have a current estate plan? If you signed your will and other estate planning documents many years ago, or have no documents at all, you risk not having your wealth transfer as you would like. It is important to have documents that express your current wishes and are flexible enough to adjust with changes in estate tax laws.
Do you have a current wealth transfer plan? The 2010 Tax Act raised the lifetime gift tax exemption—which is the amount that you can give without incurring gift tax —above and beyond the $13,000 annual gift exclusion. The gift tax exemption currently is $5.12 million.
If Congress doesn’t act, the exemption will drop to $1 million, plus inflation indexing, in 2013. Although tax is only one factor in your wealth transfer plan, you should consider making significant gifts in 2012 to take advantage of the $5.12 million gift tax exemption to reduce your estate taxes.
There are many ways to take advantage of the gift tax exemption—outright gifts, gifts in trust, or trusts that include a spouse as a beneficiary, just to name a few. Many of the strategies include leverage so you make the most out of your gift tax exemption.
You should not delay in creating a wealth transfer plan for two reasons. First, time is of the essence. This year is a prime opportunity to make a gift tax-free wealth transfer. Second, you never know when your executor will need to carry out your estate plan. Now is the time to develop a wealth transfer plan and enjoy peace of mind in knowing that your wishes will be carried out.
Review franchise agreement before making gifts
Before making gifts, auto dealers should review their franchise agreement for any manufacturer limitations on, or reporting requirements for, business ownership transfers. The franchise agreement might limit who you can transfer ownership interests to or require reporting of such transfers if they exceed a certain percentage interest in the business. Often, these restrictions don’t apply to transfers of interests in entities that own the real estate used by your dealership. Making gifts of interests in the real estate entity may benefit family members who are not directly involved in the business operations.
Take control of your wealth and maximize its future benefits by preparing now. For estate and trust planning advice built around your needs, contact Ron Altenburg at 920-996-1164, or your account director.
Ron Altenburg, CPA, shareholder, is a leader of Schenck Estate & Trust team. Ron’s extensive experience in public accounting includes research, planning and compliance work in gift, estate, and income tax.
Estate and trust matters are complex and everyone’s estate planning situation is unique. Members of Schenck’s Estate & Trust Team listen to you, work with your team of advisors, recommend strategies, and help you develop a plan that meets your goals and objectives.