Do you have a plan or a vision for your car collection?
Have you taken the necessary steps to ensure your intentions are met after you are gone?
Is it the best plan?
Many of our clients, even the most well prepared from an estate planning perspective, have a gap in their planning when it comes to their cars. If you answered no to any of the questions above, it is important to know that there are options, but even more important to understand the trade-offs associated with each one.
Let’s take a closer look at a few of your options:
OWN CARS PERSONALLY AND PASS TO FAMILY
SIMPLICITY = YES
TAX EFFICIENCY = SOMEWHAT
PROS
- You don’t have to deal with the issue
- Step up in basis at death
CONS
- May be subject to federal estate tax
- No way to ensure the protection of your collection
- Cars may be sold as fire sale prices
SELL CARS
SIMPLICITY = SOMEWHAT
TAX EFFICIENCY = NO
PROS
- You get cash from the collection before you die
CONS
- Sale proceeds may be subject to federal estate tax
- No way to ensure the protection of your collection
- Cars may be sold at fire sale prices
- You need to facilitate sales
- 20% tax on gain
DONATE COLLECTION TO CHARITY
SIMPLICITY = SOMEWHAT
TAX EFFICIENCY = YES
PROS
- Tax advantages
- Strong likelihood collection will remain in tact
CONS
- Takes asset away from family
- May require additional cash to cover vehicle upkeep
- May not be comfortable with existing charities
- If private foundation, may need to be open to public
USE IRREVOCABLE TRUST TO FORM LLC TO OWN CARS
SIMPLICITY = NO
TAX EFFICIENCY = YES
PROS
- Appreciation of vehicles can be outside taxable estate
- It’s flexible
- Cars may still be sold after your death
CONS
- Loss of step up in basis for federal estate tax purposes
- Cannot personally use cars without leasing
HOW DO YOU ENSURE YOUR INTENTIONS FOR YOUR CARS ARE MET?
CREATE A ROADMAP. WE CAN HELP. CONTACT US TO DISCUSS HOW WE CAN HELP DEVELOP A PLAN FOR YOUR CLIENT’S PRIZED CAR COLLECTION.
Have a question or a specific client in mind?
