Pub. 12 2013-2014 Issue 4

N e w J e r s e y C o a l i t i o n O f A u t o m o t i v e R e t a i l e r s W I N T E R 2 0 1 4 12 new jersey auto retailer Estate Planning and Business Succession Planning are two separate, yet intertwined, processes that dramatically impact each other. The care you take in analyzing and implementing each can have a significant effect on your financial life. In the traditional sense, estate planning means preparing for the orderly and efficient transfer of assets at death. However, estate planning has also come to involve planning for the ac- cumulation and distribution of an estate during one’s lifetime. For the majority of car dealers, your most valuable asset is the ownership of franchise(s) and the underlying real estate. For any successful business continuation or disposition plan to work, one must consider the factors of value and control. What happens to control and value upon the death, disability, or retirement of the owners? How you address these issues will dramatically affect not only your life but that of your family and partners. Three of the biggest problem areas in dealing with estate planning issues are: Wills Most people are aware that the Ameri- can Tax Relief Act of 2012 raised the Federal Estate Tax Exemption to over $5,340,000 (2014 adjusted for inf lation) per individual. What most people do not realize is that the New Jersey Estate Tax Exemption remains at $675,000 per person. Most Wills and other legal documents drafted before 2011 do not provide the f lexibility at the first death to defer the New Jersey taxes and, with a top rate of 16%, the result can be unnecessarily expensive. The correct language in your Will can delay and reduce the amount of taxes payable. Additionally, the issue of estate equalization for those family members not in the business is generally not coordinated with the succession process. Many people inadvertently discriminate against the children out of the business. A big question is how do you treat all of your children and grandchildren equally? Business Succession Agreement A Buy-Sell Agreement is an arrangement for the sale of a busi- ness interest upon a triggering event, such as the owner’s death, disability, or retirement. A well-drafted and properly funded buy-sell arrangement can protect the interests of the business owners and help facilitate the continuation of the business. Estate and Business Succession Planning By Dennis J. Amico and Paul D. Miller • Antiquated language in Wills that force New Jersey taxes to be paid at the first death. • Incomplete and dysfunctional Busi- ness Agreements that do not protect either party and have not had a valuation update in years. • Lack of a comprehensive and struc- tured management program for the next generation of children working at the dealership.