1. Taxes and Succession Planning By: Nick Reister, Attorney
[email protected] | (616) 458-8286
2. Estate Tax Exemption: Post-Fiscal Cliff The federal estate
tax exemption of $5,000,000 per taxpayer was made permanent.
However, in reality, it is not permanent, since that amount is
adjusted by cost-of-living. What this means: The tax tail no longer
wags the dog. Very few people will be concerned about the dreaded
death tax.
3. Gift Tax Exemption The federal gift tax exemption is still
unified from 2010, with the federal estate tax exemption. A
taxpayers gift tax exemption is also $5,250,000 for the 2013
calendar year. What this means: More lifetime gifting Shift lower
income tax brackets
4. Generation Skipping Transfer Taxes The GST tax exemption is
now set at $5,250,000 for 2013. Part of the unified transfer tax
exemption. What this means: Dynasty or multi-generational trusts
may become more popular. Substantial assets can be transferred to
and held in trust for several generations benefitting family
members.
5. Transfer Tax Rate The top marginal transfer tax rate
increased. 35% to a flat 40% transfer tax. What this means: If
someone passes away in 2013 with a taxable estate of $5,500,000, a
federal estate tax of 40% will be imposed on the excess above
$5,250,000. ($250,000 x 40% = $100,000 taxes)
6. Portability Continues Portability arises if one spouse dies
without using his or her exemption, the surviving spouse can use
it. ($5.25 M x 2 = $10.5 M tax-free in 2013) What this means: It is
beneficial to married couples who have a large amount of wealth
tied-up in retirement plans or annuities. Eliminates the need to
divide assets between the spouses, and to utilize separate Trusts.
(Saves $) Enables many married couples to now adopt a Joint Trust
and to abandon the old two Trust conventional estate planning
regime. (Saves $)
7. CautionOnly thing permanent about this change isthat they
will not sunset. As long as thegovernment is short on cash, all of
this couldchange.
8. Succession Planning Who will take over and what will happen
to the farm? Family members? Do they get along? Are they trained?
Can they afford it? Key employees? Competitors? Fire sale?
9. Options for Your Plan Stockholder or Operating Agreements
Separate entities for land, operations, equipment, etc. Life
insurance Trusts Offshore Captive Insurance Companies
10. Where Do I Start? Start talking about it (now) with: Spouse
Family members Business Partners and Key Employees Attorney, CPA,
Banker/Investment Advisor and Insurance Agent
11. Topics to Discuss Who wants the farm? Who has the skills to
run the farm? Who can afford the farm? Will you have enough liquid
assets in your trust and estate to allow the farm to operate and
eventually divide among your loved ones?
12. Topics to Discuss (cont.) What do your corporate documents
say? Are they current and accurate? Will you work til you die or
slow down before? How much income will you need for
retirement?
13. Thank you!Questions? Dont be a stranger: Nick Reister,
Attorney [email protected] (616) 458-8286