Session 9: 2026 Estate Tax Cliff – Why Auto Dealers Need to Revisit their Estate Plan
Speakers:
David Blum, Akerman LLP
John Davis, Haig Partners
David Harkins, Mercer Capital
Mike Toth, Haig Partners
In late 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. While some provisions were permanent, other aspects of the legislation are due to sunset December 31, 2025, including personal income tax rates, Qualified Business Income (“QBI”) deduction, State and Local Tax Limits (“SALT”), and the Estate/Gift Tax Limit.
In the past few years, auto dealer buy-sell activity has been high due to high earnings and Blue Sky multiples, and there has not been as much need for estate planning work because valuations have been high, tax rates have been low, and taxation thresholds have been high. However, these trends are reversing. With the provisions sunsetting at year-end, more dealerships will be subjected to higher tax rates.
If dealer principals don’t have a succession plan in place, it may be more favorable for them to sell their dealership in 2025 rather than 2026. If dealers plan to incentivize management/the next generation, valuation discounts help transfer the value of the auto group over time in the most tax efficient manner. Either way, dealer principals ought to reach out to an estate planning attorney to see what makes sense for their situation.