How Dick's Sporting Goods Professionals Can Develop Value and Legacy in Estate Planning

Healthcare Provider Update: Healthcare Provider for Dick's Sporting Goods Dick's Sporting Goods collaborates with various health insurance providers to offer healthcare benefits to its employees. Notably, UnitedHealthcare is among the primary healthcare providers for the company, offering various plans that cater to the diverse needs of its workforce. Potential Healthcare Cost Increases in 2026 As we approach 2026, significant healthcare cost increases loom for Dick's Sporting Goods employees and retirees. With the anticipated expiration of enhanced Affordable Care Act (ACA) premium subsidies, individuals could face out-of-pocket premium hikes of over 75%. This dramatic shift is compounded by rising medical costs driven by inflation and a surge in demand for healthcare services, particularly in behavioral health. In states like New York, some insurers are requesting premium increases upwards of 66%, signaling a challenging year ahead for those relying on employer-sponsored insurance and ACA plans. As such, it is essential for employees to plan proactively to mitigate potential financial impacts. Click here to learn more

In this third installment of our series on estate planning, we focus on the strategic use of closely held business interests for lifetime gifting, exemplified through a detailed case study of actual scenarios. This is crucial for Dick's Sporting Goods professionals contemplating the future of their business segments and the financial well-being of their successors.

Imagine a Dick's Sporting Goods professionals who estimates their business unit might sell for around $100 million based on industry revenues, despite never having a professional valuation. Our case study explores different estate planning tactics to maximize financial returns based on this estimation.

Scenario Analysis: Strategic Estate Planning Options

Option 1: No Advance Planning

In a straightforward scenario where the executive sells the business unit for the anticipated $100 million without prior estate planning, they would net $70 million after considering a 30% income tax rate. With a $13 million gift/estate tax exemption retained until death, a substantial estate tax liability would leave approximately $47.2 million for their heirs.

Option 2: Valuation-Based Gifting with a Later Sale

An alternative for the executive might involve gifting a 20% stake in the business to their children prior to a sale. Post-valuation by a specialist, the business is worth $85 million, not $100 million. The valuation discounts the gifted portion by 25% due to lack of control and marketability, significantly lowering the taxable value. This strategic gifting increases the amount transferred to heirs to $47.7 million when the business is later sold at the expected $100 million.

Option 3: Using a Grantor Trust for Gifting

Taking sophistication further, the executive could transfer a 20% stake of the business into an irrevocable grantor trust, benefiting themselves without the need to pay additional gift taxes while covering the trust’s income tax obligations. This method shelters more assets from the 40% estate tax, allowing heirs to inherit about $50.1 million, showcasing the effectiveness of grantor trusts in estate planning.

Option 4: Dual Spousal Gifting to a Grantor Trust

If the Dick's Sporting Goods professional is married, they could utilize their combined $26 million exemption before the sale by transferring a 40% stake to a grantor trust. This dual-exemption approach greatly diminishes the taxable estate value at death, resulting in a significant $58.2 million passing to their descendants.

Consequences and Key Considerations

These hypothetical scenarios underscore the importance of proactive estate planning for Dick's Sporting Goods professionals, especially when managing substantial business assets. Each strategy offers unique benefits in asset protection and tax savings. However, the potential increase in net proceeds from investments and changes in federal gift and estate tax exemptions should also be considered, along with state-specific taxes which can vary.

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Future discussions in this series will cover optimal methods to document these transfers and meet all legal and regulatory requirements, ensuring the integrity of the estate planning process. By understanding and leveraging these strategic options, business owners can significantly enhance the financial legacy they leave, contributing to the prosperity of future generations.

An often-overlooked aspect of estate planning for business owners over 60 is the use of life insurance within a trust to cover estate taxes. This strategy can prevent the need to liquidate business assets, ensuring the continuity and integrity of the business for future generations.  According to a 2023 study by the National Association of Insurance Commissioners, this approach can substantially reduce the taxable estate while providing liquidity during critical times, aligning with strategic estate planning goals.

Dick's Sporting Goods professionals can benefit from our comprehensive guide on lifetime gifting using closely held business interests for strategic estate planning. Learn how trusts and valuation discounts can significantly enhance the financial legacy left to heirs, with detailed examples and tax implications provided. This article is essential for any planning for retirement, offering insights into maximizing asset transfers to minimize tax liabilities and ensure family prosperity.

Navigating estate planning with corporate holdings is akin to managing a sophisticated sailing regatta. Just as a skilled sailor uses precise instruments and charts to optimize their course, a business owner must employ accurate valuation tools and strategic gifting tactics to navigate the complex waters of tax regulations and market conditions. Early planning ensures that the full value of their life's work is seamlessly transferred to the next generation, minimizing tax burdens and enhancing financial stability.