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Take time to make sure you’ve covered all the bases with your estate tax planning.
It’s tax time, and when you’re done writing that check for 2014 and revising your tax strategy for 2015, it’s a good time to check on your estate tax plan and see if it is still viable.
Figuring out the best way to handle estate tax is not for the faint of heart; but ignoring it is downright dangerous. If you’ve built up a good working farm, you need to protect your investment. You need a good, well thought out strategy if you’re going to leave the family farm to the family – and if you don’t figure this out, you could be leaving up to 40% of it to the government, and the kids will be forced to sell to pay off that debt.
The federal estate tax has applied to the transfer of property at death since 1916. It’s gone through many changes over the years, especially in the last decade. It was even abolished for a while in 2010. However, with all the changes that have gone on in the past, more change could be coming – so an estate tax plan needs to be reviewed every few years.
Presently, estate taxes are charged on a sliding scale on estates worth more than $5.25 million dollars. Present law allows the property to be valued based on its use – that farmland would be appraised as farmland, not as land ready to be developed. So this amount excludes a lot of farms in other parts of the country.
However, California real estate prices are higher than the average price paid for farmland elsewhere. Many farmers are land rich and cash poor, and if that land has taken a big jump in value since being purchased, a farmer could easily be sitting on $5 million in land, buildings, stock and equipment, and not even be aware of it.
So go see your CPA and find out it you need an estate tax plan. It takes a professional to develop an estate tax strategy, but it will be worth it if it keeps the family farm in the family and not sold off to pay taxes.
I’m Len Wilcox and that’s the Western View from AgNet West.