By: Randall A. Denha, J.D., LL.M.*
I am not much of a true football fan. I have little interest in Monday night games, player stats, or the draft. But as a Michigan resident with friends who bleed maze and blue, in support of friends who love the Patriots and Tom Brady’s alma mater, I’ll always make a point to cheer them on when they are in the Super Bowl. And if you had to watch one game this year, it would seem that the Super Bowl this past Sunday was the one. The excitement came right down to the final 2 minutes when rookie Malcolm Butler intercepted what otherwise would have been the Seahawks’ game-winning pass. As Tom Brady said in his MVP speech, Malcolm Butler won the game. But Mr. Brady got the MVP and in so doing, won a new 2015 Chevy Colorado. I read that Mr. Brady is considering giving Mr. Butler the truck, saying “I’m going to figure out how to make that work.” Mr. Brady, I would be happy to help you do just that. Finally a football conversation that I can engage in as a tax attorney.
It is not as easy as saying “Give the rookie the truck, Brady.” Mr. Brady will want to make decisions like this in light of his personal tax planning. In 2015, every individual has an estate tax credit which would exclude $5,430,000 from 40% federal estate taxation on transfers made during life or upon death. In general, any gifts which Mr. Brady makes will cut into his exemption. As much as we all appreciate Mr. Butler’s efforts, are we willing to consume, willy-nilly, Mr. Brady’s federal estate tax credit on gifts to Mr. Butler? Perhaps we don’t have to.
Any individual may give $14,000 of value to any other person in 2015 before cutting into his/her lifetime exemption. In addition, spouses can agree to use each other’s exemptions. Mr. Brady and his wife, Ms. Bundchen, may elect for Mr. Brady to use both of their $14,000 exclusions, so Mr. Brady can give $28,000 before tapping into his credit. This does not restrict Ms. Bundchen’s ability to make tax-free gifts, other than if she wants to make additional tax-free gifts to Mr. Butler. Based on my web research, I’d put the value of the Chevy Colorado at around $35,000, new and decked out. After using Mr. Brady and Ms. Bundchen’s combined $28,000 exclusion on the $35,000 transfer to Mr. Butler, they would still be $7,000 short, resulting in use of their federal estate tax exemption. Is there any way to make the transfer without using up any of that precious credit? Is Mr. Butler willing to take the truck 50/50 with someone else? If so, that frees up another $28,000 of exclusion available.
How accurate is that $35,000 value? They say value decreases once you drive it off the lot. What about if you drive it off a lot, onto a football field, then off a football field? Can it be argued that the value is less than $35,000? These are some of the questions that Mr. Brady’s advisors will want to ask to help Mr. Brady make it work.
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*Randall A. Denha, j.d,, ll.m., principal and founder of the law firm of Denha & Associates, PLLC with offices in Birmingham, MI and West Bloomfield, MI. Mr. Denha continues to be recognized as a “Super Lawyer” by Michigan Super Lawyers in the areas of Trusts and Estates Law; a “Top Lawyer” by D Business Magazine in the areas of Estate Planning and Tax Law; a Five Star Wealth Planning Professional and a New York Times Top Attorney in Michigan. Mr. Denha can be reached at 248-265-4100 or by email at rad@denhalaw.com
