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Fiscal Cliff Leads to Jedi Estate-Planning Tactics

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A recent report concerning Star Wars creator George Lucas' decision to sell the company he built from the ground up may not seem to have much to do with the approaching fiscal cliff, but a closer look reveals how his decision was impacted by estate-planning realities.

Given the timing of the $4.05 billion sale, the 68-year-old Lucas appears to be thinking a lot about his future. By cashing out now, experts say that the moviemaker is acting to ensure that his family does not have to deal with unraveling his finances after his death. The sale will also allow Lucas to spend his retirement focusing on his charities, especially an educational foundation to which he has pledged to give away a huge portion of his estate.

Given that none of his children intended to take over the film business, the sale makes it easier for his heirs to avoid having to divide a movie empire about which they knew nothing. Financial advisers see this as a classic case of exit planning for a successful business owner.

The timing of the deal is also no accident. Due to the upcoming fiscal cliff, if no action is taken then tax rates are set to jump at the beginning of the New Year. Long-term capital gains tax from the sale of assets held more than one year are taxed at a rate of 15% for investors in the 25% income-tax bracket or above, the level that Lucas would be at. Those rates are scheduled to rise to 20% in January and it's likely that Lucas wanted to avoid handing an extra 5% of his billions to the federal government.

While this is all good news for Lucas, it can be much more complicated for your typical small business owner. Most people who own a successful small business are not able to unload it to a major Fortune 500 company once they're ready to retire. Instead, they have to consider other, often more complicated options including bringing on a junior partner or working out some kind of royalty arrangement with a new buyer. Making sure that you can extract value from the company you spent your life building is an important challenge that requires the advice of an experienced Alabama estate-planning attorney.

Whether you have few assets or a multi-million dollar estate, you need to have an effective estate plan. If you have questions or concerns contact the Huntsville wills and estates attorneys at Martinson & Beason, P.C. today.

Source: "George Lucas's Jedi estate planning," by Quentin Fottrell, published at MarketWatch.com.

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