Dealer Insights - May/June 2012 - Estate Planning Checklist: Timing is Everything

Published: May 1, 2012
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One of the essential questions in estate planning is: Who should inherit your assets? The answer can vary during your lifetime, and your challenge is to make sure you stay current with life changes. You’ll also need to remain on top of tax law developments that will affect your estate.

Here’s a checklist of times when you should review your estate plan and make any necessary changes.

ALL ABOUT FAMILY

For most dealership owners, changes in family structure and make-up will have a significant impact on estate planning.

If you’re getting remarried (or married for the first time), for example, you’ll need to consider how marital rights in your state will affect your assets — that includes your dealership and the land it’s on if you own it. Most states have laws to protect the surviving spouse. Additional restrictions will apply if you live in a community property state.

Here are some other family-related times that call for an estate plan review:

Having children in a first or subsequent marriage
“Acquiring” stepchildren
Adopting children
Seeing one of your children get married
Having grandchildren
Getting divorced

Experiencing a death in the family, including that of a spouse or other beneficiary, of course, would be another key time to revisit your estate plan and make appropriate revisions.

TAX LAW CHANGES

Life changes aren’t the only times to revisit your estate plan. Sometimes Congress dictates when it’s time to consider estate planning moves, and this year is a good example. Currently, an all-time-high gift tax exemption of $5.12 million is in place, but it’s scheduled to drop to $1 million in 2013.

So, assuming you haven’t already used up part of your exemption on other gifts, if you make gifts up to $5.12 million this year, you won’t owe any gift tax on them. Plus, at minimum, the future appreciation on those assets will be removed from your taxable estate. But before making gifts, make sure you can afford to do so; you don’t want to risk your own financial well-being.

Here are some other potential tax law changes to keep an eye on:

Gift, estate and generation-skipping transfer (GST) tax rate increases (or reductions)
Estate and GST tax exemption reductions (or increases)
Income tax law changes that could affect your net worth

AND IN THE END

Careful planning with your tax advisor may even allow you to structure an estate plan whereby income-producing assets are kept out of your estate at death while providing an income stream to you during your lifetime. Whatever strategies are part of your estate plan, periodic reviews are essential.