As the end of the year gets closer, and possible increases in the federal estate tax become more likely, many are coming up with various ways to take advantage of the current favorable rates. For exampe, a story at the National Review this week suggested that a move by several former sports stars to sell various memorabilia might be motivated, in part, by the possible tax changes to take effect January 1st.
The article explained how New York Yankee great Don Larsen was planning to sell the baseball jersey that he wore in 1956 when he pitched a perfect game in the World Series--the only time that has ever happened. Larsen explained that he was motivated by a desire to help out his grandchildren. He plans to use the proceeds to pay for their college education. He indicated that while the jersey obviously has importance to him, the value of helping his loved one's outweighs the value he places on the 56-year old jersey.
Don Larsen is not the only sports figure selling valuable items. Apparently well-known college basketball coach Bobby Knight is selling NCAA championship rings along with several other valuable sports items. Like Larsen, his motivation is to acquire funds to use on his family member's education. Former world heavyweight champion boxer Evander Holyfield has also sold various items related to his boxing days in recent months.
Of course, possiblle changes in the estate tax are not the only factor at play in the decision to make these transactions. However, it is likely that the potential of losing a larger chunk of the property's value to taxes in the coming years might have factored into the decision to sell these items now instead of later. The basic idea is straightforward. The future of the estate tax is uncertain. Though, if changes are made they will almost undoubtedly be in the form of increased rates and lower exemption levels. Therefore, instead of waiting to see how things shake out, many are deciding to sell certain assets now and collect the value when the rates are known.
This decision-making applies to all local families, not just those with valuable memorabilia. An estate planning attorney can explain how it might make sense to take certain assets to be used for another (i.e. paying for an education) and give them away now. That is because waiting until next year--or waiting to be handed down in an inheritance after death--often means that there will be a significantly larger tax bite on the asset. Of course all of this must be weighed against your overall financial situation, as you should only sell assets or gift them to others when you can afford to lose the property now. A professional can provide experienced advice to explain what might make the most sense in your situation.
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