Over the last several years the government has made it difficult to avoid paying taxes on estates. The The federal estate and generation-skipping taxes were repealed, but the gift tax exemption was stuck at $1m.
But wait, how is it possible that the Republicans would let this happen. Well get yourself a good estate attorney and he’ll tell you that we have a $5 million estate tax exemption and a 35% estate tax rate. That’s enough to make most people think they are immune to estate tax . This creates an array of tax-planning opportunities for the car collector.
And If you leave everything you own to your spouse at your death, you owe no tax and your spouse ends up with a $10 million estate tax exemption. In essence, your unused exemption transfers to your spouse.
This is the time to make some really big estate planning moves.
As an example, you can create a Family Limited Liability (FLP) company, transfer all you collector cars into the FLP tax free.
Gift your FLP interest to your kids or a trust and have up to $5million dollars in tax exemptions.
As your car collection appreciates in value the all that appreciation belongs to the trust or the kids and is exempt from gift and estate taxes.