Issue link: http://read.dmtmag.com/i/81015
MANAGEMENT GIFT AND ESTATE TAXES TO RISE IN 2013 A succession plan is not the same as an estate plan, but the two do overlap in that both are concerned with the disposition of business ownership. For exam- ple, a good succession plan today would take into consideration the fact that relatively generous laws governing gift and estate taxes are due to expire at the end of 2012. Barring an act of Congress, which is not expected in this election year, tax rates on estates and gifts will increase in 2013. Business owners who intend to make large gifts to heirs should act now to avoid taxes when the current law expires at the end of the year. Briefly, in 2012, lifetime gifts of $5 million ($10 million for mar- ried couples) are exempted from taxes, with any amount over that taxed at 35%. Next year, the tax rate will be 55%. For estate taxes, next year the exemption of $5 million ($10 mil- lion for couples) will drop to $1 million ($2 million for couples) and the taxes on any overage will rise from 35% to 55%. It is possible to create trusts that allow business owners to set aside gifts now, which will be taxed at much lower rates than will prevail if the gifts are made in the future or are distributed as part of an estate after the death of the business owners. – G.S. compensate all employees accord- ing to prevailing market practices. If the owner wants to reward fam- ily members who are not actively engaged in the business, he or she can assign them equity stakes and pay dividends or profits accordingly. Delegate leadership. It is hard for many leaders, especially com- pany founders, to relinquish deci- sion-making. Yet it is essential. This involves empowering not only the successor, but other senior man- agers as well, for they will be bet- ter and more loyal executives as a result. It may also involve hiring new talent and reconstituting the board of directors to add outsiders with critical expertise. This does not mean giving up control of the business. The prin- cipal owners can retain a major- ity of the company's voting shares, enabling them to take charge if a crisis occurs, but for the most part serving as mentors. Write it and work at it. The plan must be in writing, but not carved in stone. It should be modified as situations change and opportuni- ties arise. Have a Plan B. Many private companies remain family enterpris- es through several generations, but many also do not. There are times when selling the company is the best thing for the family, and own- ers should be aware of and open to the possibility. Indeed, the mar- ket for vintners and vineyards has become much more active in the past few months, with a number of deals in process. But that's another story. Now is the time to begin planning for the day the next leader takes over. Greg Scott is a partner in PwC's Private Company Services prac- tice. He has more than 30 years of experience working in the wine and vineyard industry. He has writ- ten a course book on taxation and accounting for wineries and vine- yards, teaches an extension course at UC Davis, and speaks frequently to wine industry groups. Comments? Please email us at feedback@vwm-online.com. 72 VINEYARD & WINERY MANAGEMENT SEPT - OCT 2012 WWW.VWM-ONLINE.COM