Pub. 1 2011 Issue 2

14 AUTOMOBILE DEALER NEWS ILLINOIS www.illinoisdealers.com Q good news — continued exemption amount for gifting which, up until the passage of the 2010 Act, was $1 million. The increase of the lifetime exemption amount from $1 million to $5 million provides opportunities to transfer wealth to your beneficiaries now, without paying gift tax. Ideal assets to transfer could include marketable securi- ties, closely held business interests, or real estate investments. Do you have an interest in a closely held business that you’d like to transfer through either gift or sale? The combination of low interest rates, depressed values of some assets, and the increased lifetime exemption amount to $5 million per person makes this an ideal time to review your busi- ness transition strategy. Business transition is a process of gifting or selling your ownership to your beneficiaries in a strategic way over the course of time. Now is a great time to review that plan and continue to move it forward. If you could gift potential future appreciation of an asset to save estate tax, would you want to? Many people believe that in order to save estate taxes, they need to give away the entire asset to have executed effective plan- ning. However, this isn’t necessarily the case. Some of the most successful planning techniques don’t involve shifting the actual assets to your beneficiaries, but rather shifting the appreciation of the assets to your beneficiaries. These techniques allow you to retain your wealth at your existing level, but allow your ben- eficiaries to share in the “upside,” thereby accomplishing what can be significant estate tax savings. Is your trust either the primary or contingent beneficiary of your IRA? Whenever there’s a change in the estate tax exemption amount, beneficiary designations should be reviewed. If you named your trust as the primary or contingent beneficiary of your IRA or 401(k) to optimize your estate tax savings, you may want help evaluating this in light of the increased estate tax exemption for 2011 and 2012. Do you own any life insurance that should be reviewed? Many people buy life insurance and never look at it again. The new estate tax rules are a great reason to pull them out and take a look. It could be that you no longer have the same needs, especially if the insurance was purchased to provide for liquidity to fund estate taxes. You may also find with the major economic changes over the past 10 years the policy performance is signifi- cantly different from what was originally projected. Are you currently making annual exclusion gifts? Have you made annual exclusion gifts yet this year? Each person is allowed to gift an “annual exclusion” amount (the annual amount that can be transferred to a beneficiary free from gift tax). For 2011, this amount is $13,000 per beneficiary. These gifts are not taxable and do not use up any portion of the $5 million exemption available in 2011 and 2012. Annual exclu- sion giving is an easy, tax-free way to transfer wealth and future appreciation of that wealth out of the donor’s gross estate. Disclosures: Data and current tax information are provided by the sources believed to be reliable. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Plante & Moran PLLC provides this update to convey general information and not for the purposes of providing spe- cific legal, tax, or estate planning advice. Use of the strategies or techniques mentioned herein may not be appropriate for you. You should consult your personal tax or legal advisor regarding your situation. Q For assistance or additional information with respect to the matters discussed in this article, please contact its author, James M. Eagan CPA, Partner and Automotive Consultant, Plante & Moran PLLC, at 847.628.8865, or you can email jim.eagan@plantemoran.com. dealers feel are front line ready, do indeed have defects. An informed consumer will either discover those defects on the lot and expect to negotiate the price, or find the defect later causing irritation and negative feedback when they have to return to the dealership for repair. A qual- ity control process in place to eliminate defects BEFORE presentation to the consumer differentiates one superior dealer from another, and translates into a higher profit margin. Besides greater profit margins, added bonuses of being prepared with a totally reconditioned vehicle are: increased sales staff confidence, increased turnover rate, and positive feedback from consumers. Kurt A. Karlson serves on the advisory board for Driven Brands, which is the franchisor of IAG brands and the owner of Meineke Car Care Centers and Maaco Collision and Auto Painting. For more information call 1-877-644- 4IAG (4424)or visit the web at www.IlAutoGroup.com . Q it’s a new world — continued In today’s computer/internet savvy environment, there is no excuse for a dealership to not be PREPARED to sell to an informed consumer! Car purchases are increasing due to an improved economy and consumers are more informed due to the availability of information technology. It is a New World! BE READY! Q